H.B. No. 4171
AN ACT
relating to the nonsubstantive revision of The Securities Act,
including conforming amendments.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
ARTICLE 1. NONSUBSTANTIVE REVISION OF THE SECURITIES ACT
SECTION 1.01. The Government Code is amended by adding Title 12 to read as follows:
TITLE 12. SECURITIES ACT
CHAPTER 4001. GENERAL PROVISIONS
SUBCHAPTER A. SHORT TITLE; PURPOSES; CONSTRUCTION
Sec. 4001.001. SHORT TITLE
Sec. 4001.002. PURPOSES; CONSTRUCTION
Sec. 4001.003. SEVERABILITY
SUBCHAPTER B. DEFINITIONS
Sec. 4001.051. APPLICABILITY OF DEFINITIONS;
CONSTRUCTION OF CERTAIN CONJUNCTIONS
Sec. 4001.052. AGENT
Sec. 4001.053. BOARD
Sec. 4001.054. BROKER
Sec. 4001.055. COMMISSIONER
Sec. 4001.056. DEALER
Sec. 4001.057. FEDERAL COVERED INVESTMENT ADVISER
Sec. 4001.058. FRAUD; FRAUDULENT PRACTICE
Sec. 4001.059. INVESTMENT ADVISER
Sec. 4001.060. INVESTMENT ADVISER REPRESENTATIVE
Sec. 4001.061. ISSUER
Sec. 4001.062. MORTGAGE
Sec. 4001.063. NO PAR VALUE; PAR VALUE
Sec. 4001.064. PERSON; COMPANY
Sec. 4001.065. REGISTERED DEALER
Sec. 4001.066. REGISTERED INVESTMENT ADVISER
Sec. 4001.067. SALE; OFFER FOR SALE; SELL
Sec. 4001.068. SECURITY
SUBCHAPTER C. GENERAL ADMINISTRATIVE PROVISIONS
Sec. 4001.101. SUFFICIENCY OF NOTICE
Sec. 4001.102. CONSENT FOR SERVICE OF PROCESS
SUBCHAPTER D. OTHER GENERAL PROVISIONS
Sec. 4001.151. PROSECUTION UNDER CERTAIN OTHER LAW
Sec. 4001.152. GOOD FAITH
Sec. 4001.153. BURDEN OF PROOF ON EXEMPTION
Sec. 4001.154. CERTIFIED COPIES OF CERTAIN DOCUMENTS
OR INSTRUMENTS AS EVIDENCE
Sec. 4001.155. PROOF OF CERTAIN RECORDS
TITLE 12. SECURITIES ACT
CHAPTER 4001. GENERAL PROVISIONS
SUBCHAPTER A. SHORT TITLE; PURPOSES; CONSTRUCTION
Sec. 4001.001. SHORT TITLE. This title may be cited as The
Securities Act. (V.A.C.S. Art. 581-1.)
Sec. 4001.002. PURPOSES; CONSTRUCTION. (a) The general
purposes of this title are to:
(1) protect investors and, consistent with that
purpose, encourage capital formation, job formation, and free and
competitive securities markets;
(2) maximize coordination with federal and other
states' laws and administration, particularly with respect to
procedure, reports, forms, and exemptions; and
(3) minimize regulatory burdens on issuers and other
persons subject to this title, especially small businesses.
(b) This title may be construed and implemented to
effectuate the title's general purposes. (V.A.C.S. Art. 581-10-1.)
Sec. 4001.003. SEVERABILITY. The provisions of this title
are severable. If any provision of this title is declared void or
unconstitutional, the remaining provisions of this title would have
been enacted notwithstanding such judicial determination of the
invalidity of the provision, and the remaining provisions shall
remain in effect. (V.A.C.S. Art. 581-38.)
SUBCHAPTER B. DEFINITIONS
Sec. 4001.051. APPLICABILITY OF DEFINITIONS; CONSTRUCTION
OF CERTAIN CONJUNCTIONS. (a) The definition for a term provided by
this chapter applies in this title unless the context in which the
term is used indicates a different meaning.
(b) The term "and" may be construed to mean "or," and the
term "or" may be construed to mean "and." (V.A.C.S. Art. 581-4
(part); Art. 581-4, Subsec. J (part).)
Sec. 4001.052. AGENT. (a) Except as provided by Subsection
(b), "agent" includes a person or company employed, appointed, or
authorized by a dealer to sell, offer for sale or delivery, solicit
subscriptions to or orders for, or deal in any other manner in,
securities in this state directly or through a subagent.
(b) If a corporation or partnership is registered as a
dealer under this title, an officer of the corporation or partner of
the partnership is not deemed an agent solely because of the
officer's or partner's status as an officer or partner of that
entity. (V.A.C.S. Art. 581-4, Subsec. D.)
Sec. 4001.053. BOARD. "Board" means the State Securities
Board. (New.)
Sec. 4001.054. BROKER. "Broker" means "dealer" as defined
in this title. (V.A.C.S. Art. 581-4, Subsec. H.)
Sec. 4001.055. COMMISSIONER. "Commissioner" means the
securities commissioner. (New.)
Sec. 4001.056. DEALER. (a) "Dealer" includes:
(1) a person or company, other than an agent, who for
all or part of the person's or company's time engages in this state,
directly or through an agent, in selling, offering for sale or
delivery, soliciting subscriptions to or orders for, undertaking to
dispose of, or inviting offers for any security; and
(2) a person or company who deals in any other manner
in any security in this state.
(b) Except as provided by Subsection (c), an issuer, other
than a registered dealer, who directly or through any person or
company, other than a registered dealer, offers for sale, sells, or
makes sales of the issuer's own securities is deemed a dealer and
shall comply with this title.
(c) An issuer is not deemed a dealer under Subsection (b)
if:
(1) the issuer sells or offers for sale securities to a
registered dealer or only by or through a registered dealer acting
as fiscal agent for the issuer; or
(2) the transaction is exempt as provided by
Subchapter A, Chapter 4005.
(d) Except as expressly provided otherwise in this title, a
person or company engaged in the sale of, offer for sale of,
solicitation of, subscription to, dealing in, or delivery of a
security made in a transaction or under a condition specified in
Subchapter A, Chapter 4005, is not deemed a dealer within the
meaning of this title. (V.A.C.S. Art. 581-4, Subsec. C; Art. 581-5
(part).)
Sec. 4001.057. FEDERAL COVERED INVESTMENT ADVISER.
"Federal covered investment adviser" means an investment adviser
who is registered under the Investment Advisers Act of 1940 (15
U.S.C. Section 80b-1 et seq.). (V.A.C.S. Art. 581-4, Subsec. O.)
Sec. 4001.058. FRAUD; FRAUDULENT PRACTICE. (a) "Fraud"
and "fraudulent practice" include:
(1) a misrepresentation of a relevant fact made in any
manner;
(2) a promise, representation, or predication as to
the future not made honestly and in good faith;
(3) an intentional failure to disclose a material
fact;
(4) a direct or indirect gain, through the sale of a
security, of an underwriting or promotion fee or profit, or of a
selling or managing commission or profit, that is so gross or
exorbitant as to be unconscionable; and
(5) a scheme, device, or other artifice to obtain a
profit, fee, or commission described by Subdivision (4).
(b) Nothing in this section limits the full meaning of
"fraud," "fraudulent," or "fraudulent practice" as applied or
accepted in courts. (V.A.C.S. Art. 581-4, Subsec. F.)
Sec. 4001.059. INVESTMENT ADVISER. "Investment adviser"
includes a person who, for compensation, engages in the business of
advising another, either directly or through publications or
writings, with respect to the value of securities or to the
advisability of investing in, purchasing, or selling securities or
a person who, for compensation and as part of a regular business,
issues or adopts analyses or a report concerning securities, as may
be further defined by board rule. The term does not include:
(1) a bank or a bank holding company, as defined by the
Bank Holding Company Act of 1956 (12 U.S.C. Section 1841 et seq.),
that is not an investment company;
(2) a lawyer, accountant, engineer, teacher, or
geologist whose performance of the services is solely incidental to
the practice of the person's profession;
(3) a dealer or agent who receives no special
compensation for those services and whose performance of those
services is solely incidental to transacting business as a dealer
or agent;
(4) the publisher of a bona fide newspaper, news
magazine, or business or financial publication of general and
regular circulation; or
(5) a person whose advice, analyses, or report does
not concern a security other than a security that is:
(A) a direct obligation of or an obligation the
principal or interest of which is guaranteed by the United States
government; or
(B) issued or guaranteed by a corporation in
which the United States has a direct or indirect interest and
designated by the United States Secretary of the Treasury under
Section 3(a)(12), Securities Exchange Act of 1934 (15 U.S.C.
Section 78c(a)(12)), as an exempt security for purposes of that
Act. (V.A.C.S. Art. 581-4, Subsec. N.)
Sec. 4001.060. INVESTMENT ADVISER REPRESENTATIVE. (a)
Except as provided by Subsection (b), "investment adviser
representative" includes a person or company who, for compensation,
is employed, appointed, or authorized by an investment adviser to
solicit clients for the investment adviser or who provides
investment advice, directly or through subagents, as defined by
board rule, to an investment adviser's clients on behalf of the
investment adviser.
(b) "Investment adviser representative" does not include a
partner of a partnership or officer of a corporation or other entity
that is registered as an investment adviser under this title solely
because of the person's status as a partner or officer of that
entity. (V.A.C.S. Art. 581-4, Subsec. P.)
Sec. 4001.061. ISSUER. "Issuer" means and includes a
person or company who has issued, proposes to issue, or issues any
security. (V.A.C.S. Art. 581-4, Subsec. G.)
Sec. 4001.062. MORTGAGE. "Mortgage" includes a deed of
trust to secure a debt. (V.A.C.S. Art. 581-4, Subsec. I.)
Sec. 4001.063. NO PAR VALUE; PAR VALUE. (a) "No par value"
as applied to shares of stock or other securities means the
securities are without a given or specified par value.
(b) For purposes of classifying or computing the par value
of shares of stock or other securities of no par value, the amount
for which the securities are sold or offered for sale to the public
is used as a basis. (V.A.C.S. Art. 581-4, Subsec. K.)
Sec. 4001.064. PERSON; COMPANY. (a) The terms "person" and
"company" include:
(1) any of the following formed under the laws of this
or another state, country, sovereignty, or political subdivision of
a state, country, or sovereignty, and regardless of whether
incorporated or unincorporated:
(A) a corporation;
(B) a person;
(C) a company, including a joint stock company;
(D) a partnership, including a limited
partnership;
(E) an association;
(F) a firm;
(G) a syndicate; or
(H) a trust; and
(2) a government or a political subdivision or agency
of a government.
(b) As used in Subsection (a), "trust":
(1) is deemed to include a common law trust; and
(2) does not include a trust created or appointed
under or by virtue of a last will and testament or by a court.
(c) The definition of "person" assigned by Section 311.005
does not apply to any provision in this title. (V.A.C.S. Art.
581-4, Subsec. B; New.)
Sec. 4001.065. REGISTERED DEALER. "Registered dealer"
means a dealer the commissioner has registered under Sections
4004.054 and 4004.055, or Section 4004.056. (V.A.C.S. Art. 581-4,
Subsec. M.)
Sec. 4001.066. REGISTERED INVESTMENT ADVISER. "Registered
investment adviser" means an investment adviser to whom the
commissioner has issued a registration certificate under Sections
4004.054 and 4004.055, or Section 4004.056. (V.A.C.S. Art. 581-4,
Subsec. Q.)
Sec. 4001.067. SALE; OFFER FOR SALE; SELL. (a) "Sale,"
"offer for sale," and "sell" include every disposition or attempted
disposition of a security for value.
(b) "Sale" means and includes:
(1) a contract or agreement in which a security is
sold, traded, or exchanged for money, property, or another thing of
value; or
(2) a transfer of or agreement to transfer a security,
in trust or otherwise.
(c) "Sale" or "offer for sale" includes a subscription, an
option for sale, a solicitation of sale, a solicitation of an offer
to buy, an attempt to sell, or an offer to sell, directly or by an
agent, by a circular, letter, or advertisement or otherwise,
including the deposit in any manner in the United States mail within
this state of a circular, letter, or other advertising matter.
(d) "Sell" means any act by which a sale is made.
(e) A security given or delivered with or as a bonus on
account of a purchase of securities or other thing of value is
conclusively presumed to:
(1) constitute a part of the subject of the purchase;
and
(2) have been sold for value.
(f) The sale of a security under conditions that entitle the
purchaser or subsequent holder to exchange the security for another
security or to purchase another security is not deemed a sale or
offer for sale of the other security.
(g) This section does not limit the meaning of the terms
"sale," "offer for sale," or "sell" as used by or accepted in
courts. (V.A.C.S. Art. 581-4, Subsec. E (part).)
Sec. 4001.068. SECURITY. (a) The term "security":
(1) includes:
(A) a limited partner interest in a limited
partnership;
(B) a share;
(C) a stock;
(D) a treasury stock;
(E) a stock certificate under a voting trust
agreement;
(F) a collateral trust certificate;
(G) an equipment trust certificate;
(H) a preorganization certificate or receipt;
(I) a subscription or reorganization
certificate;
(J) a note, bond, debenture, mortgage
certificate, or other evidence of indebtedness;
(K) any form of commercial paper;
(L) a certificate in or under a profit sharing or
participation agreement;
(M) a certificate or instrument representing an
interest in or under an oil, gas, or mining lease, fee, or title;
(N) a certificate or instrument representing or
secured by an interest in any of the capital, property, assets,
profits, or earnings of a company;
(O) an investment contract; and
(P) any other instrument commonly known as a
security, regardless of whether the instrument is similar to
another instrument listed in this subsection; and
(2) applies regardless of whether the security is
evidenced by a written instrument.
(b) "Security" does not include an insurance policy,
endowment policy, annuity contract, or optional annuity contract,
or any contract or agreement in relation to and in consequence of
any such policy or contract, issued by an insurance company subject
to the supervision or control of the Texas Department of Insurance
when the form of such policy or contract has been filed with the
department as required by law. (V.A.C.S. Art. 581-4, Subsec. A.)
SUBCHAPTER C. GENERAL ADMINISTRATIVE PROVISIONS
Sec. 4001.101. SUFFICIENCY OF NOTICE. In this title unless
otherwise specified, a notice required by this title is sufficient
if sent by registered or certified mail addressed to a person at:
(1) the address designated in any filing the person
submitted to the commissioner; or
(2) the person's last known address. (V.A.C.S. Art.
581-26 (part).)
Sec. 4001.102. CONSENT FOR SERVICE OF PROCESS. (a) This
section applies only to an issuer, dealer, or investment adviser
that is:
(1) organized under the laws of any other state,
territory, or government; or
(2) domiciled in any other state.
(b) Unless a board rule specifies otherwise, an issuer,
dealer, or investment adviser subject to this section must include
in an application filed with or notice filing submitted to the
commissioner a provision that appoints the commissioner as the
attorney of the issuer, dealer, or investment adviser who may be
served with process in any action or proceeding against the issuer,
dealer, or investment adviser that arises out of any transaction
subject to this title.
(c) The provision required by Subsection (b) must be
executed by an authorized agent of the issuer, dealer, or
investment adviser filing the application or submitting the notice
filing.
(d) Service of process on the commissioner in accordance
with a provision executed under this section has the same effect as
if the issuer, dealer, or investment adviser was created or formed
under the laws of this state and served with process in this state.
(e) If the commissioner is served with process in accordance
with a provision executed under this section, the commissioner
shall forward the process by United States mail to the last known
address of the issuer, dealer, or investment adviser. (V.A.C.S.
Art. 581-8.)
SUBCHAPTER D. OTHER GENERAL PROVISIONS
Sec. 4001.151. PROSECUTION UNDER CERTAIN OTHER LAW.
Nothing in Chapter 269 (S.B. 294), Acts of the 55th Legislature,
Regular Session, 1957 (Article 581-1 et seq., Vernon's Texas Civil
Statutes), limits the liability of a person or company, or of its
officers or agents, imposed by law as of August 22, 1957, so as to
prevent the prosecution of the person or company, or of its officers
or agents, for violating another statute. (V.A.C.S. Art. 581-31.)
Sec. 4001.152. GOOD FAITH. (a) A provision of this title
that imposes liability or a penalty does not apply to an act or
omission made in good faith in conformity with a board rule.
(b) This section applies regardless of whether the rule is
subsequently amended, rescinded, or determined by judicial or other
authority to be invalid for any reason. (V.A.C.S. Art. 581-28-1,
Subsec. E.)
Sec. 4001.153. BURDEN OF PROOF ON EXEMPTION. (a) A
complaint, information or indictment, or a writ or proceeding
brought under this title is not required to negate an exemption
under this title.
(b) A party claiming an exemption under this title has the
burden of proof on the exemption. (V.A.C.S. Art. 581-37.)
Sec. 4001.154. CERTIFIED COPIES OF CERTAIN DOCUMENTS OR
INSTRUMENTS AS EVIDENCE. (a) Except as provided by Subsection (b),
a copy of a paper, document, or instrument filed in the office of
the commissioner and certified by the commissioner must be admitted
in evidence in a court and elsewhere in this state in any case in
which the original would be admitted in evidence.
(b) In any proceeding in a court, the court may, on cause
shown, require the production of the original paper, document, or
instrument.
(c) In a prosecution, suit, or other action or proceeding in
a court of this state that arises under this title, a certificate
showing compliance or noncompliance with a provision of this title
by a dealer, agent, investment adviser, or investment adviser
representative constitutes prima facie evidence of the person's
compliance or noncompliance with that provision if the certificate:
(1) is under the state seal; and
(2) is signed by the commissioner.
(d) A certificate described by Subsection (c) is admissible
in evidence in an action to enforce this title. (V.A.C.S. Art.
581-30 (part).)
Sec. 4001.155. PROOF OF CERTAIN RECORDS. All records of the
former securities divisions of the offices of the secretary of
state and the former Board of Insurance Commissioners for which
custody was assumed by the commissioner under Chapter 269, Acts of
the 55th Legislature, Regular Session, 1957, shall be proven under
the commissioner's certificate. (V.A.C.S. Art. 581-30 (part).)
CHAPTER 4002. STATE SECURITIES BOARD AND SECURITIES COMMISSIONER
SUBCHAPTER A. GENERAL PROVISIONS
Sec. 4002.001. APPLICABILITY OF OTHER LAW
Sec. 4002.002. SUNSET PROVISION
SUBCHAPTER B. STATE SECURITIES BOARD
Sec. 4002.051. APPOINTMENT OF BOARD
Sec. 4002.052. MEMBERSHIP ELIGIBILITY
Sec. 4002.053. MEMBERSHIP AND EMPLOYEE RESTRICTIONS
Sec. 4002.054. TERMS; VACANCY
Sec. 4002.055. PRESIDING OFFICER
Sec. 4002.056. GROUNDS FOR REMOVAL
Sec. 4002.057. PER DIEM
Sec. 4002.058. BOARD MEMBER TRAINING
SUBCHAPTER C. SECURITIES COMMISSIONER AND EMPLOYEES OF BOARD
Sec. 4002.101. SECURITIES COMMISSIONER
Sec. 4002.102. DEPUTY SECURITIES COMMISSIONER;
SECURITIES COMMISSIONER APPOINTEES
Sec. 4002.103. DIVISION OF RESPONSIBILITIES
Sec. 4002.104. STANDARDS OF CONDUCT INFORMATION
Sec. 4002.105. CAREER LADDER PROGRAM; PERFORMANCE
EVALUATIONS
Sec. 4002.106. EQUAL EMPLOYMENT OPPORTUNITY POLICY
Sec. 4002.107. WRITTEN EMPLOYEE COMPLAINT PROCEDURE
SUBCHAPTER D. POWERS AND DUTIES OF BOARD AND COMMISSIONER
Sec. 4002.151. RULES
Sec. 4002.152. RULES REGARDING COMPETITIVE BIDDING OR
ADVERTISING
Sec. 4002.153. BOARD DELEGATION OF RULEMAKING
AUTHORITY
Sec. 4002.154. COMMISSIONER DISCRETION REGARDING RULES
Sec. 4002.155. DEPOSIT OF RECEIPTS TO GENERAL REVENUE
FUND
Sec. 4002.156. BOARD AUTHORITY TO EXERCISE
COMMISSIONER'S POWERS
Sec. 4002.157. LIST OF SECURITIES OFFERED
Sec. 4002.158. RECORD OF PROCEEDINGS
Sec. 4002.159. RECORD OF CERTAIN FILINGS AND ORDERS
Sec. 4002.160. COMMISSIONER'S ACCESS TO RECORDS AND
REPORTS OF OTHER STATE AGENCIES
Sec. 4002.161. CONFIDENTIALITY OF CERTAIN INFORMATION
Sec. 4002.162. BOARD ACCESS TO OFFICES AND RECORDS
Sec. 4002.163. ANNUAL REPORT
SUBCHAPTER E. CONSUMER INTEREST AND OTHER PUBLIC INTEREST
INFORMATION
Sec. 4002.201. CONSUMER INTEREST INFORMATION
Sec. 4002.202. PUBLIC PARTICIPATION
Sec. 4002.203. DOCUMENTS AND OTHER INFORMATION FILED
WITH COMMISSIONER; PUBLIC RECORDS
CHAPTER 4002. STATE SECURITIES BOARD AND SECURITIES COMMISSIONER
SUBCHAPTER A. GENERAL PROVISIONS
Sec. 4002.001. APPLICABILITY OF OTHER LAW. The board and
commissioner are subject to Chapters 551, 2001, and 2002.
(V.A.C.S. Art. 581-2, Subsec. N.)
Sec. 4002.002. SUNSET PROVISION. The State Securities
Board is subject to Chapter 325 (Texas Sunset Act). Unless
continued in existence as provided by that chapter, the board is
abolished and this title expires September 1, 2019. (V.A.C.S. Art.
581-2, Subsec. O.)
SUBCHAPTER B. STATE SECURITIES BOARD
Sec. 4002.051. APPOINTMENT OF BOARD. (a) The State
Securities Board consists of five citizens of this state appointed
by the governor with the advice and consent of the senate.
(b) Members of the board must be members of the general
public.
(c) Appointments to the board shall be made without regard
to the race, color, disability, sex, religion, age, or national
origin of the appointee.
(d) A member of the board is eligible for reappointment.
(V.A.C.S. Art. 581-2, Subsecs. A (part), B (part).)
Sec. 4002.052. MEMBERSHIP ELIGIBILITY. A person is not
eligible for appointment to the board if the person or the person's
spouse:
(1) is registered as a dealer, agent, investment
adviser, or investment adviser representative;
(2) has an active notice filing under this title to
engage in business in this state as an investment adviser or
investment adviser representative;
(3) is employed by or participates in the management
of a business entity engaged in business as a securities dealer or
investment adviser; or
(4) has, other than as a consumer, a financial
interest in a business entity engaged in business as a securities
dealer or investment adviser. (V.A.C.S. Art. 581-2, Subsec. B
(part).)
Sec. 4002.053. MEMBERSHIP AND EMPLOYEE RESTRICTIONS. (a)
In this section, "Texas trade association" means a cooperative and
voluntarily joined association of business or professional
competitors in this state designed to assist its members and its
industry or profession in dealing with mutual business or
professional problems and in promoting their common interest.
(b) A person may not be a member of the board or an employee
of the board employed in a "bona fide executive, administrative, or
professional capacity," as that phrase is used for purposes of
establishing an exemption to the overtime provisions of the federal
Fair Labor Standards Act of 1938 (29 U.S.C. Section 201 et seq.),
if:
(1) the person is an officer, employee, or paid
consultant of a Texas trade association in a field regulated by the
board; or
(2) the person's spouse is an officer, manager, or paid
consultant of a Texas trade association in a field regulated by the
board.
(c) A person may not be a member of the board or act as the
general counsel to the board if the person is required to register
as a lobbyist under Chapter 305 because of the person's activities
for compensation on behalf of a profession related to the operation
of the board. (V.A.C.S. Art. 581-2-1.)
Sec. 4002.054. TERMS; VACANCY. (a) Members of the board
serve staggered six-year terms, with as near as possible to
one-third of the members' terms expiring January 20 of each
odd-numbered year.
(b) The governor shall fill a vacancy on the board for the
unexpired term. (V.A.C.S. Art. 581-2, Subsec. A (part).)
Sec. 4002.055. PRESIDING OFFICER. The governor shall
designate a member of the board as the board's presiding officer to
serve in that capacity at the will of the governor. (V.A.C.S. Art.
581-2, Subsec. D (part).)
Sec. 4002.056. GROUNDS FOR REMOVAL. (a) It is a ground for
removal from the board that a member:
(1) does not have at the time of taking office the
qualifications required by Section 4002.051;
(2) does not maintain during service on the board the
qualifications required by Section 4002.051;
(3) is ineligible for membership under Section
4002.052 or 4002.053;
(4) cannot, because of illness or disability,
discharge the member's duties for a substantial part of the member's
term; or
(5) is absent from more than half of the regularly
scheduled board meetings that the member is eligible to attend
during a calendar year without an excuse approved by a majority vote
of the board.
(b) The validity of an action of the board is not affected by
the fact that it is taken when a ground for removal of a board member
exists.
(c) If the commissioner has knowledge that a potential
ground for removal exists, the commissioner shall notify the
board's presiding officer of the potential ground. The presiding
officer shall then notify the governor and the attorney general
that a potential ground for removal exists. If the potential ground
for removal involves the presiding officer, the commissioner shall
notify the board's next highest ranking officer, who shall then
notify the governor and the attorney general that a potential
ground for removal exists. (V.A.C.S. Art. 581-2, Subsecs. E, F.)
Sec. 4002.057. PER DIEM. A member of the board is entitled
to a per diem as set by legislative appropriation for each day the
member engages in the business of the board. (V.A.C.S. Art. 581-2,
Subsec. D (part).)
Sec. 4002.058. BOARD MEMBER TRAINING. (a) A person who is
appointed to and qualifies for office as a member of the board may
not vote, deliberate, or be counted as a member in attendance at a
meeting of the board until the person completes a training program
that complies with this section.
(b) The training program must provide the person with
information regarding:
(1) the legislation that created the board;
(2) the programs operated by the board;
(3) the role and functions of the board;
(4) the rules of the board, with an emphasis on the
rules that relate to disciplinary and investigatory authority;
(5) the current budget for the board;
(6) the results of the most recent formal audit of the
board;
(7) the requirements of:
(A) the open meetings law, Chapter 551;
(B) the public information law, Chapter 552;
(C) the administrative procedure law, Chapter
2001; and
(D) other laws relating to public officials,
including conflict-of-interest laws; and
(8) any applicable ethics policies adopted by the
board or the Texas Ethics Commission.
(c) A person appointed to the board is entitled to
reimbursement, as provided by the General Appropriations Act, for
travel expenses incurred in attending the training program
regardless of whether the attendance at the program occurs before
or after the person qualifies for office. (V.A.C.S. Art. 581-2-3.)
SUBCHAPTER C. SECURITIES COMMISSIONER AND EMPLOYEES OF BOARD
Sec. 4002.101. SECURITIES COMMISSIONER. The board shall
appoint a securities commissioner who serves at the pleasure of the
board and who, under the board's supervision, shall administer this
title. (V.A.C.S. Art. 581-2, Subsec. G (part).)
Sec. 4002.102. DEPUTY SECURITIES COMMISSIONER; SECURITIES
COMMISSIONER APPOINTEES. (a) The commissioner, with the consent
of the board, may designate a deputy securities commissioner who
shall perform all of the duties of the commissioner required by law
to be performed by the commissioner when the commissioner is absent
or unable to act for any reason.
(b) The commissioner shall appoint other persons as
necessary to carry out the powers and duties of the commissioner
under this title and under other laws granting jurisdiction to or
applicable to the board or the commissioner.
(c) The commissioner may delegate to a person appointed
under Subsection (b) powers and duties of the commissioner as the
commissioner considers necessary. (V.A.C.S. Art. 581-2, Subsec.
H.)
Sec. 4002.103. DIVISION OF RESPONSIBILITIES. The board
shall develop and implement policies that clearly separate the
policy-making responsibilities of the board and the management
responsibilities of the commissioner and board employees.
(V.A.C.S. Art. 581-2-4.)
Sec. 4002.104. STANDARDS OF CONDUCT INFORMATION. The
commissioner or the commissioner's designee shall provide to
members of the board and to board employees, as often as necessary,
information regarding the requirements for office or employment
under this title, including information regarding a person's
responsibilities under applicable laws relating to standards of
conduct for state officers or employees. (V.A.C.S. Art. 581-2-2.)
Sec. 4002.105. CAREER LADDER PROGRAM; PERFORMANCE
EVALUATIONS. (a) The commissioner or the commissioner's designee
shall develop an intra-agency career ladder program. The program
must require intra-agency posting of each nonentry level position
at least 10 days before the date of any public posting.
(b) The commissioner or the commissioner's designee shall
develop a system of annual performance evaluations based on
measurable job tasks. All merit pay for board employees must be
based on the system established under this subsection. (V.A.C.S.
Art. 581-2, Subsec. K.)
Sec. 4002.106. EQUAL EMPLOYMENT OPPORTUNITY POLICY. (a)
The commissioner or the commissioner's designee shall prepare and
maintain a written policy statement that implements a program of
equal employment opportunity to ensure that all personnel decisions
are made without regard to race, color, disability, sex, religion,
age, or national origin.
(b) The policy statement must include:
(1) personnel policies, including policies relating
to recruitment, evaluation, selection, training, and promotion of
personnel, that show the intent of the board to avoid the unlawful
employment practices described by Chapter 21, Labor Code; and
(2) an analysis of the extent to which the composition
of the board's personnel is in accordance with state and federal law
and a description of reasonable methods to achieve compliance with
state and federal law.
(c) The policy statement must be:
(1) updated annually;
(2) reviewed by the Texas Workforce Commission civil
rights division for compliance with Subsection (b)(1); and
(3) filed with the governor's office. (V.A.C.S. Art.
581-2-7.)
Sec. 4002.107. WRITTEN EMPLOYEE COMPLAINT PROCEDURE. (a)
The commissioner or the commissioner's designee shall maintain a
file on each written complaint filed with the commissioner or board
concerning an employee or former employee. The file must include
the information listed in Section 4007.051 for files maintained
under that section for complaints against persons registered under
this title.
(b) The commissioner or the commissioner's designee shall
provide to the person filing the complaint and to each person who is
a subject of the complaint a copy of the board's policies and
procedures relating to complaint investigation and resolution.
(c) The commissioner or the commissioner's designee, at
least quarterly until final disposition of the complaint, shall
notify the person filing the complaint and each person who is a
subject of the complaint of the status of the investigation unless
the notice would jeopardize an undercover investigation. (V.A.C.S.
Art. 581-2-6, Subsecs. A (part), B, C; New.)
SUBCHAPTER D. POWERS AND DUTIES OF BOARD AND COMMISSIONER
Sec. 4002.151. RULES. (a) Subject to Subsection (b), the
board may adopt rules as necessary to implement this title,
including rules:
(1) governing registration statements, applications,
notices, and reports; and
(2) defining terms, regardless of whether used in this
title, provided that the definitions are not inconsistent with the
purposes fairly intended by the policy and provisions of this
title.
(b) The board may not adopt a rule unless, after notice and
opportunity for comment, the board finds that the action is:
(1) necessary or appropriate in the public interest or
for the protection of investors; and
(2) consistent with the purposes fairly intended by
the policy and provisions of this title.
(c) For the purpose of adopting rules, the board may
classify securities, persons, and matters within the board's
jurisdiction and prescribe different requirements for different
classes.
(d) The board, in the board's discretion, may waive a
requirement of a rule in a situation in which, in the board's
opinion, the requirement is not necessary in the public interest or
for the protection of investors. (V.A.C.S. Art. 581-28-1, Subsecs.
B, C.)
Sec. 4002.152. RULES REGARDING COMPETITIVE BIDDING OR
ADVERTISING. (a) The board may not adopt rules restricting
competitive bidding or advertising by a person registered under
this title except to prohibit false, misleading, or deceptive
practices by the person.
(b) The board may not include in the board's rules to
prohibit false, misleading, or deceptive practices by a person
regulated by the board a rule that:
(1) restricts the person's use of any advertising
medium;
(2) restricts the person's personal appearance or use
of the person's voice in an advertisement;
(3) relates to the size or duration of an
advertisement by the person; or
(4) restricts the person's advertisement under a trade
name.
(c) This section does not affect limitations on advertising
in Section 4005.012, 4005.013, or 4005.021 or in rules adopted by
the board under Section 4005.024. (V.A.C.S. Art. 581-28-1, Subsec.
F.)
Sec. 4002.153. BOARD DELEGATION OF RULEMAKING AUTHORITY.
(a) The board by rule may delegate to the commissioner or the
deputy securities commissioner the authority granted to the board
under Section 4002.151 or 4002.152 to adopt rules or to waive the
requirements of rules as the board considers appropriate.
(b) Any rule adopted by the commissioner or the deputy
securities commissioner based on the authority delegated under this
section must be adopted in accordance with Sections 4002.151 and
4002.152. (V.A.C.S. Art. 581-28-1, Subsec. D.)
Sec. 4002.154. COMMISSIONER DISCRETION REGARDING RULES. In
applying the standards of this title, the commissioner may waive or
relax any restriction or requirement in a board rule that, in the
commissioner's opinion, is unnecessary for the protection of
investors in a particular case. (V.A.C.S. Art. 581-10, Subsec. D.)
Sec. 4002.155. DEPOSIT OF RECEIPTS TO GENERAL REVENUE FUND.
The commissioner or board shall deposit money received from
assessments or charges under this title to the credit of the general
revenue fund. (V.A.C.S. Art. 581-36 (part).)
Sec. 4002.156. BOARD AUTHORITY TO EXERCISE COMMISSIONER'S
POWERS. The board may exercise any power or perform any act the
commissioner is authorized to exercise or perform under this title.
(V.A.C.S. Art. 581-2, Subsec. G (part).)
Sec. 4002.157. LIST OF SECURITIES OFFERED. At any time, the
commissioner may, in the exercise of reasonable discretion under
this title, require a dealer to file with the commissioner a partial
or complete list of securities that the dealer:
(1) is offering or advertising for sale in this state
at the time of the request; or
(2) has offered or advertised for sale in this state
during the six-month period preceding the date of the request.
(V.A.C.S. Art. 581-23, Subsec. D.)
Sec. 4002.158. RECORD OF PROCEEDINGS. A complete record
shall be kept of all proceedings held before the commissioner on any
hearing or investigation. (V.A.C.S. Art. 581-26 (part).)
Sec. 4002.159. RECORD OF CERTAIN FILINGS AND ORDERS. (a)
The commissioner shall maintain a record of:
(1) the names and addresses of all registered dealers,
registered agents, registered investment advisers, registered
investment adviser representatives, and persons who have submitted
a notice filing under this title; and
(2) all orders of the commissioner denying,
suspending, or revoking a registration.
(b) A record maintained under Subsection (a) must be open
for public inspection.
(c) This section does not apply to information made
confidential by Section 4002.161, 4007.052, or 4007.056 or other
law. (V.A.C.S. Art. 581-11 (part).)
Sec. 4002.160. COMMISSIONER'S ACCESS TO RECORDS AND REPORTS
OF OTHER STATE AGENCIES. (a) During an investigation for the
purpose of enforcing this title or in connection with the
application of a person or company for registration or for a permit
qualifying securities for sale, the commissioner or deputy
securities commissioner shall have free access to all records of,
all reports of, and all reports made to an agency or department of
this state.
(b) If the commissioner or deputy securities commissioner
discloses any information made confidential by law, the affected
person or company has a right of action on the official bond of the
commissioner or deputy securities commissioner for the person's or
company's injuries in a suit brought in the name of the state at the
relation of the person or company.
(c) This section may not be interpreted to prohibit or limit
the publication of rulings or decisions of the commissioner.
(V.A.C.S. Art. 581-28, Subsec. A (part).)
Sec. 4002.161. CONFIDENTIALITY OF CERTAIN INFORMATION. (a)
To the extent not otherwise provided by this title, any
intra-agency or interagency notes, memoranda, reports, or other
communications consisting of advice, analyses, opinions, or
recommendations are confidential.
(b) Except as provided by Subsection (c) or Section
4007.056(b) or (c), the commissioner may not disclose a document or
other information made confidential by Subsection (a) unless the
disclosure is made to the public under court order for good cause
shown.
(c) The commissioner, at the commissioner's discretion, may
disclose confidential information in the commissioner's possession
to:
(1) a governmental or regulatory authority or any
association of governmental or regulatory authorities approved by
board rule; or
(2) any receiver appointed under Section 4007.151.
(d) Disclosure of information under Subsection (c) does not
violate any other provision of this title or Chapter 552.
(e) This section may not be interpreted to prohibit or limit
the publication of rulings or decisions of the commissioner.
(V.A.C.S. Art. 581-28, Subsecs. A (part), B; New.)
Sec. 4002.162. BOARD ACCESS TO OFFICES AND RECORDS. Each
member of the board shall have access to all of the offices and
records under the commissioner's supervision. (V.A.C.S. Art.
581-2, Subsec. G (part).)
Sec. 4002.163. ANNUAL REPORT. On or before January 1 of
each year, the board, with the advice of the commissioner, shall
report to the governor and the presiding officer of each house of
the legislature about the administration of this title and plans
and needs for future securities regulation. The report must
include a detailed accounting of all funds received and disbursed
by the board during the preceding year. (V.A.C.S. Art. 581-2,
Subsec. J.)
SUBCHAPTER E. CONSUMER INTEREST AND OTHER PUBLIC INTEREST
INFORMATION
Sec. 4002.201. CONSUMER INTEREST INFORMATION. (a) The
board shall prepare information of consumer interest describing:
(1) the regulatory functions of the board and
commissioner; and
(2) the procedures by which consumer complaints are
filed with and resolved by the board or commissioner.
(b) The board shall make the information available to the
public and appropriate state agencies. (V.A.C.S. Art. 581-2,
Subsec. L (part).)
Sec. 4002.202. PUBLIC PARTICIPATION. The board by rule
shall develop and implement policies that provide the public with a
reasonable opportunity to appear before the board and to speak on
any issue under the board's jurisdiction. (V.A.C.S. Art. 581-2-5.)
Sec. 4002.203. DOCUMENTS AND OTHER INFORMATION FILED WITH
COMMISSIONER; PUBLIC RECORDS. (a) All information, papers,
documents, instruments, and affidavits required by this title to be
filed with the commissioner are public records.
(b) All information, papers, documents, instruments, and
affidavits required by this title to be filed with the commissioner
must be open to inspection and examination by a purchaser or
prospective purchaser of securities, or by the agent or
representative of a purchaser or prospective purchaser of
securities. The commissioner shall:
(1) provide to a purchaser or prospective purchaser of
securities, or an agent or representative of those persons, any
information required to be filed with the commissioner under this
title; and
(2) on request by a person described by Subdivision
(1), provide a certified copy of any paper, document, instrument,
or affidavit filed with the commissioner under this title.
(c) This section does not apply to information made
confidential by Section 4002.161, 4007.052, or 4007.056 or other
law. (V.A.C.S. Art. 581-11 (part).)
CHAPTER 4003. SECURITIES
SUBCHAPTER A. PERMIT QUALIFYING SECURITIES FOR SALE
Sec. 4003.001. PERMIT REQUIRED; EXCEPTIONS
Sec. 4003.002. PERMIT APPLICATION TO QUALIFY
SECURITIES FOR SALE
Sec. 4003.003. STATEMENT OF FINANCIAL CONDITION AND
INCOME STATEMENT
Sec. 4003.004. EXCEPTIONS TO CERTIFICATION REQUIREMENT
FOR FINANCIAL STATEMENTS
Sec. 4003.005. PERMIT FEE
Sec. 4003.006. EXAMINATION OF AND DETERMINATION ON
PERMIT APPLICATION
Sec. 4003.007. FORM AND CONTENTS OF PERMIT
Sec. 4003.008. TERM OF PERMIT
Sec. 4003.009. RENEWAL OF PERMIT
Sec. 4003.010. USE OF PERMIT FOR CERTAIN PURPOSES
PROHIBITED
SUBCHAPTER B. REGISTRATION BY NOTIFICATION
Sec. 4003.051. ELIGIBILITY FOR REGISTRATION BY
NOTIFICATION
Sec. 4003.052. REGISTRATION STATEMENT REQUIRED
Sec. 4003.053. EXCEPTION TO CERTIFICATION REQUIREMENT
FOR FINANCIAL STATEMENTS
Sec. 4003.054. REGISTRATION PROCEDURES
Sec. 4003.055. EFFECTIVE DATE OF REGISTRATION BY
NOTIFICATION
Sec. 4003.056. EFFECT OF REGISTRATION BY NOTIFICATION
Sec. 4003.057. TERM OF REGISTRATION
Sec. 4003.058. RENEWAL OF REGISTRATION
Sec. 4003.059. INSUFFICIENT OR FRAUDULENT REGISTRATION
STATEMENT
SUBCHAPTER C. REGISTRATION BY COORDINATION
Sec. 4003.101. ELIGIBILITY FOR REGISTRATION BY
COORDINATION
Sec. 4003.102. REGISTRATION STATEMENT REQUIRED
Sec. 4003.103. EXAMINATION OF AND DETERMINATION ON
REGISTRATION STATEMENT
Sec. 4003.104. TERM OF REGISTRATION
Sec. 4003.105. RENEWAL OF REGISTRATION
SUBCHAPTER D. PROHIBITED SALES
Sec. 4003.151. CERTAIN SALES PROHIBITED
SUBCHAPTER E. REGULATION OF OFFERS
Sec. 4003.201. DEFINITION
Sec. 4003.202. APPLICABILITY
Sec. 4003.203. AUTHORIZED WRITTEN, PRINTED, OR
BROADCAST OFFERS
Sec. 4003.204. AUTHORIZED ORAL OFFERS
Sec. 4003.205. DEALER NAMED IN OFFER
Sec. 4003.206. EFFECT OF COMPLIANCE OR NONCOMPLIANCE
SUBCHAPTER F. CROWDFUNDING
Sec. 4003.251. DEFINITION
Sec. 4003.252. CROWDFUNDING
SUBCHAPTER G. PROTECTION FOR PURCHASERS OF SECURITIES
Sec. 4003.301. DEPOSIT IN TRUST ACCOUNT
Sec. 4003.302. MARKETING EXPENSES
Sec. 4003.303. PROSPECTUS REQUIRED FOR CERTAIN OFFERS
Sec. 4003.304. INVESTOR EDUCATION
CHAPTER 4003. SECURITIES
SUBCHAPTER A. PERMIT QUALIFYING SECURITIES FOR SALE
Sec. 4003.001. PERMIT REQUIRED; EXCEPTIONS. (a) A dealer
or agent may not sell or offer for sale any securities issued after
September 6, 1955, unless the commissioner has issued a permit
qualifying securities for sale for those securities to the issuer
of the securities or a registered dealer.
(b) This section does not apply to:
(1) securities that have been registered by
notification under Subchapter B or by coordination under Subchapter
C; or
(2) transactions or securities that are exempt under
Chapter 4005. (V.A.C.S. Art. 581-7, Subsec. A, Subdiv. (1) (part);
Art. 581-10, Subsec. B (part).)
Sec. 4003.002. PERMIT APPLICATION TO QUALIFY SECURITIES FOR
SALE. (a) The commissioner may not issue a permit qualifying
securities for sale required by Section 4003.001 until the issuer
of the securities or a registered dealer files with the
commissioner an application for the permit in the form of a
statement containing the following information:
(1) the name, residence, and post office address of
each of the company's officers and directors;
(2) the location of the company's principal office and
each branch office in this state;
(3) a copy of the company's certificate of formation or
articles of incorporation or partnership or association and any
amendments to those documents;
(4) if the company is a corporation, a copy of:
(A) all minutes of any proceedings of the
company's directors, stockholders, or members relating to or
affecting the issuance of the securities; and
(B) the company's bylaws and any amendments to
the bylaws;
(5) if the company is a trustee, a copy of all
instruments by which the trust is created and in which the trust is
accepted, acknowledged, or declared;
(6) a statement showing:
(A) the amount of capital stock and, if there is
no capital stock, the amount of capital of the issuer that is
contemplated to be employed;
(B) the number of shares into which the stock is
divided or, if not divided into shares, what division is to be made
or is contemplated;
(C) the par value of each share or, if there are
shares with no par value, the price at which the security is
proposed to be sold; and
(D) the promotional fees or commissions to be
paid for the sale of the securities, including:
(i) all compensation of every nature
allowed to be paid to the promoters or allowed for the sale of the
securities;
(ii) how the compensation is to be paid,
whether in cash, securities, service or otherwise, or partly of
either or both;
(iii) the amount of cash to be paid or
securities to be issued, given, transferred, or sold to promoters
for promotion or organization services and expenses; and
(iv) the amount of promotion or
organization services and expenses that the issuer will assume or
pay in any way;
(7) a copy of:
(A) certificates of the stock and all other
securities to be sold or offered for sale, together with
application blanks for the stock and securities;
(B) any contract the company proposes to make
concerning the securities; and
(C) any prospectus or advertisement or other
description of security prepared by or for the company for
distribution or publication; and
(8) the statement of financial condition and income
statement described by Section 4003.003.
(b) The statement in an application under this section must
be:
(1) verified under oath by an executive officer or
partner of the issuer or registered dealer filing the application;
and
(2) attested by the secretary or partner of the issuer
or registered dealer filing the application. (V.A.C.S. Art. 581-7,
Subsec. A, Subdiv. (1) (part).)
Sec. 4003.003. STATEMENT OF FINANCIAL CONDITION AND INCOME
STATEMENT. (a) In this section, "current liabilities" means all
liabilities that will mature and become due not later than the first
anniversary of the date the application listing the liabilities is
filed under this subchapter.
(b) A statement of financial condition required in the
application under this subchapter must:
(1) be detailed;
(2) be prepared in accordance with generally accepted
auditing standards and procedures and generally accepted
accounting principles;
(3) reflect the financial condition of the issuer of
the securities to be qualified for sale on a date not earlier than
the 90th day before the date the issuer or registered dealer files
the application;
(4) show all of the issuer's liabilities by listing all
current liabilities and, separately from current liabilities, all
other liabilities, including contingent liabilities, showing the
amount of those liabilities that are secured by mortgage or
otherwise, the issuer's assets that are subject to the mortgage,
and the dates of maturity of the mortgage indebtedness;
(5) list all of the issuer's assets in detail and show
how the value of the assets was determined;
(6) show whether the value of the assets represents:
(A) the assets' actual cost in money;
(B) the assets' present market value; or
(C) some other value of the assets;
(7) show the present actual value of the assets; and
(8) state whether the value listed in the statement is
greater or less than the assets':
(A) actual cost value in money; and
(B) present market value.
(c) The statement under Subsection (b) must show the amount
for which any real property listed as an asset is rendered for state
and county taxation or assessed for taxation.
(d) The statement under Subsection (b) must describe any
assets consisting of anything other than cash or real property in
detail to give the commissioner the fullest possible information.
The commissioner may require the filing of additional information
as the commissioner considers necessary to determine whether the
true value of those assets is reflected in the statement.
(e) A statement under Subsection (b) that lists assets
subject to a repurchase agreement or similar agreement under the
terms of which the absolute ownership of or title to the assets is
qualified or limited must fully state:
(1) the terms of the agreement; and
(2) the amount and character of the assets subject to
the agreement.
(f) Subject to Subsection (g), the income statement
required in an application under this subchapter must:
(1) be detailed;
(2) be prepared in accordance with generally accepted
auditing standards and procedures and generally accepted
accounting principles; and
(3) cover the lesser of:
(A) the preceding three years of the issuer's
operations; or
(B) the period the issuer has been operating.
(g) If the issuer has not been operating but is taking over a
concern of any kind that was previously operating, the income
statement required in an application under this subchapter must:
(1) show the operations of the concern taken over for
the three years preceding the taking over of the concern; and
(2) clearly reflect the amount of net income or net
loss incurred during each year shown. (V.A.C.S. Art. 581-7,
Subsec. A, Subdiv. (1) (part), Subsec. D (part).)
Sec. 4003.004. EXCEPTIONS TO CERTIFICATION REQUIREMENT FOR
FINANCIAL STATEMENTS. (a) Financial statements filed as required
by this subchapter are not required to be certified by an
independent certified public accountant or independent public
accountant if:
(1) the fiscal year of the issuer of the securities to
be qualified for sale ended on a date earlier than the 90th day
before the date of the filing; and
(2) financial statements in addition to those required
by this subchapter are filed that:
(A) contain the information required by Section
4003.003; and
(B) are certified by an independent certified
public accountant or independent public accountant as of the end of
the issuer's preceding fiscal year.
(b) Instead of being audited and certified, the financial
statements described by Section 4003.003 of a small business
issuer, as defined by board rule, that meets all other requirements
the board by rule or order prescribes, conditionally or
unconditionally, may be reviewed by an independent certified public
accountant in accordance with the Statements on Standards for
Accounting and Review Services promulgated by the American
Institute of Certified Public Accountants. (V.A.C.S. Art. 581-7,
Subsec. A, Subdiv. (1) (part), Subsec. D (part).)
Sec. 4003.005. PERMIT FEE. The commissioner shall charge
the fees provided by Chapter 4006 for the issuance of a permit
qualifying securities for sale. (V.A.C.S. Art. 581-10, Subsec. B
(part).)
Sec. 4003.006. EXAMINATION OF AND DETERMINATION ON PERMIT
APPLICATION. (a) On the filing of an application for a permit
qualifying securities for sale under this subchapter, the
commissioner shall examine the application and the papers and
documents filed with the application.
(b) After the examination, the commissioner shall:
(1) issue a permit to the applicant authorizing the
applicant to issue and dispose of the securities if the
commissioner determines that:
(A) the applicant's proposed plan of business
appears to be fair, just, and equitable;
(B) any consideration paid or to be paid by
promoters for the securities is fair, just, and equitable if that
consideration is less than the proposed offering price to the
public; and
(C) the securities the applicant proposes to
issue and the methods to be used by the applicant in issuing and
disposing of the securities will not work a fraud upon the purchaser
of the securities; or
(2) deny the application for a permit and notify the
applicant in writing of the commissioner's decision if the
commissioner determines that the applicant's proposed plan of
business appears to be unfair, unjust, or inequitable. (V.A.C.S.
Art. 581-10, Subsec. A.)
Sec. 4003.007. FORM AND CONTENTS OF PERMIT. A permit
qualifying securities for sale must:
(1) be in the form the commissioner prescribes; and
(2) state in bold type that the issuance of the permit
is permissive only and does not constitute a recommendation or
endorsement of the securities permitted to be issued. (V.A.C.S.
Art. 581-10, Subsec. B (part).)
Sec. 4003.008. TERM OF PERMIT. A permit qualifying
securities for sale that is issued under this subchapter is valid
for one year. (V.A.C.S. Art. 581-10, Subsec. B (part).)
Sec. 4003.009. RENEWAL OF PERMIT. (a) An issuer or
registered dealer may file a renewal application with the
commissioner if the securities authorized to be sold under a permit
qualifying securities for sale that is issued under this subchapter
are not sold before the permit expires.
(b) The renewal application must:
(1) state:
(A) the total number of shares sold in this
state;
(B) the total number of shares sold outside this
state; and
(C) the total number of shares outstanding;
(2) contain a detailed balance sheet;
(3) contain an operating statement; and
(4) provide any other information the commissioner may
require.
(c) The commissioner shall examine a renewal application
and issue a renewal permit or deny the application using the
standards stated in Section 4003.006 applicable to an original
application.
(d) If issued, a renewal permit:
(1) is valid for one year; and
(2) must be in the form the commissioner prescribes.
(V.A.C.S. Art. 581-10, Subsec. B (part).)
Sec. 4003.010. USE OF PERMIT FOR CERTAIN PURPOSES
PROHIBITED. A dealer, issuer, or agent may not use a permit
qualifying securities for sale in connection with a sale or effort
to sell a security. (V.A.C.S. Art. 581-10, Subsec. C.)
SUBCHAPTER B. REGISTRATION BY NOTIFICATION
Sec. 4003.051. ELIGIBILITY FOR REGISTRATION BY
NOTIFICATION. (a) Securities may be registered by notification
under this subchapter if the securities are issued by an issuer
that:
(1) has been in continuous operation for at least
three years; and
(2) has shown, during at least the three years
preceding the date of registration under this subchapter, average
annual net earnings after deducting all prior charges, including
income taxes but not including charges on securities to be retired
out of the proceeds of sale, as follows:
(A) for interest-bearing securities, not less
than one and one-half times the annual interest charges on those
securities and on all other outstanding interest-bearing
securities of equal rank;
(B) for securities with a specified dividend
rate, not less than one and one-half times the annual dividend
requirements on those securities and on all other outstanding
securities of equal rank; and
(C) for securities with no specified dividend
rate, not less than five percent on all outstanding securities of
equal rank, together with the amount of those securities then
offered for sale, based on the maximum price at which the securities
are to be offered for sale.
(b) For purposes of calculating average annual net earnings
under Subsection (a)(2)(C), an issuer's ownership of more than 50
percent of the outstanding voting stock of a corporation:
(1) is construed as the issuer's proportionate
ownership of that corporation; and
(2) permits the inclusion of that corporation's
earnings applicable to the payment of dividends on the stock owned
in the earnings of the issuer of the securities being registered by
notification. (V.A.C.S. Art. 581-7, Subsec. B, Subdiv. (1).)
Sec. 4003.052. REGISTRATION STATEMENT REQUIRED. (a) To
register securities by notification that are entitled to that
registration, an issuer of the securities or a registered dealer
must file with the commissioner a registration statement that
complies with this section.
(b) A registration statement filed under this section must:
(1) be in the form the commissioner prescribes;
(2) be signed by the applicant filing the statement;
and
(3) contain the following information:
(A) the name and business address of the main
office of the issuer of the securities to be registered and the
address of the issuer's principal office, if any, in this state;
(B) the title of the securities to be registered
and the total amount of securities to be offered;
(C) the price at which the securities are to be
offered for sale to the public, the amount of securities to be
offered in this state, and the amount of the registration fee,
computed as provided by Chapter 4006;
(D) a brief statement of the facts showing that
the securities are entitled to be registered by notification;
(E) the name and business address of the
applicant filing the statement;
(F) subject to Subsection (c) and except as
provided by Section 4003.053, financial statements that include,
for at least the three years preceding the date of registration:
(i) a certified income statement;
(ii) a certified balance sheet; and
(iii) a certified statement of
stockholders' equity;
(G) a copy of any prospectus describing the
securities; and
(H) a filing of a consent to service of process
conforming to the requirements of Section 4001.102, if the issuer:
(i) is registering the securities; and
(ii) is not a resident of this state or
incorporated or formed under the laws of this state.
(c) The financial statements described by Subsection
(b)(3)(F) must reflect the financial condition of the issuer of the
securities to be registered on a date not earlier than the 90th day
before the date the issuer or registered dealer files the
registration statement.
(d) Filing a registration statement that complies with this
section constitutes the registration of the securities by
notification, subject to Section 4003.055. (V.A.C.S. Art. 581-7,
Subsec. B, Subdiv. (2) (part), Subsec. D (part).)
Sec. 4003.053. EXCEPTION TO CERTIFICATION REQUIREMENT FOR
FINANCIAL STATEMENTS. Financial statements filed as required by
this subchapter are not required to be certified by an independent
certified public accountant or independent public accountant if:
(1) the fiscal year of the issuer of the securities to
be registered ended on a date earlier than the 90th day before the
date of the filing; and
(2) financial statements in addition to those required
by this subchapter are filed that:
(A) contain the information required by Section
4003.052; and
(B) are certified by an independent certified
public accountant or independent public accountant as of the end of
the issuer's preceding fiscal year. (V.A.C.S. Art. 581-7, Subsec.
D (part).)
Sec. 4003.054. REGISTRATION PROCEDURES. (a) The
commissioner shall complete the procedures specified by this
section to register securities entitled to registration by
notification.
(b) The commissioner shall:
(1) examine the registration statement filed under
Section 4003.052 and the accompanying papers to determine their
sufficiency under the requirements of this subchapter; and
(2) record the registration by notification of the
securities described on receipt of:
(A) the registration statement;
(B) any prospectus;
(C) payment of the filing fee and registration
fee; and
(D) a consent to service of process, if required.
(V.A.C.S. Art. 581-7, Subsec. B, Subdiv. (2) (part); Art. 581-10,
Subsec. B (part).)
Sec. 4003.055. EFFECTIVE DATE OF REGISTRATION BY
NOTIFICATION. (a) Except as provided by Subsection (b), the
registration of securities by notification takes effect five days
after the date the commissioner receives the registration statement
filed under Section 4003.052 and all accompanying papers.
(b) The commissioner may waive or reduce the five-day
waiting period if the commissioner determines that the public will
not be injured by the waiver or reduction of the waiting period.
(V.A.C.S. Art. 581-7, Subsec. B, Subdiv. (2) (part).)
Sec. 4003.056. EFFECT OF REGISTRATION BY NOTIFICATION. On
registration of securities by notification, the securities may be
sold in this state by a registered dealer or a registered agent.
(V.A.C.S. Art. 581-7, Subsec. B, Subdiv. (2) (part).)
Sec. 4003.057. TERM OF REGISTRATION. A registration of
securities by notification is effective for one year. (V.A.C.S.
Art. 581-7, Subsec. B, Subdiv. (2) (part).)
Sec. 4003.058. RENEWAL OF REGISTRATION. A registration of
securities by notification may be renewed for additional periods of
one year if:
(1) the securities are entitled to registration under
this subchapter at the time of renewal; and
(2) a new filing is made under this subchapter
together with the payment of the renewal fee of $10. (V.A.C.S. Art.
581-7, Subsec. B, Subdiv. (2) (part).)
Sec. 4003.059. INSUFFICIENT OR FRAUDULENT REGISTRATION
STATEMENT. (a) If at any time, in the commissioner's opinion, the
information in a registration statement filed under this subchapter
is insufficient to establish that the securities described in the
statement are or were entitled to registration by notification
under this subchapter, or that the registration information
contains or contained false, misleading, or fraudulent facts, the
commissioner may order the applicant who filed the statement to
cease and desist from selling or offering for sale the securities
registered or proposed to be registered by notification under this
subchapter until additional information is filed with the
commissioner that in the commissioner's judgment is necessary to
establish that those securities are or were entitled to
registration by notification under this subchapter.
(b) The provisions of Section 4007.107 relating to hearings
apply to an order entered under this section. (V.A.C.S. Art. 581-7,
Subsec. B, Subdiv. (2) (part).)
SUBCHAPTER C. REGISTRATION BY COORDINATION
Sec. 4003.101. ELIGIBILITY FOR REGISTRATION BY
COORDINATION. A security may be registered by coordination if a
registration statement has been filed under the Securities Act of
1933 (15 U.S.C. Section 77a et seq.) in connection with the same
offering. (V.A.C.S. Art. 581-7, Subsec. C, Subdiv. (1) (part).)
Sec. 4003.102. REGISTRATION STATEMENT REQUIRED. To
register securities by coordination, an issuer of the securities or
a registered dealer must file with the commissioner a registration
statement that contains:
(1) the following information:
(A) the amount of securities to be offered in
this state;
(B) the states in which a registration statement
or similar document in connection with the offering has been or is
expected to be filed; and
(C) any adverse order, judgment, or decree
previously entered in connection with the offering by a court or the
Securities and Exchange Commission;
(2) one copy of the prospectus filed under the
Securities Act of 1933 (15 U.S.C. Section 77a et seq.) together with
all amendments to the prospectus;
(3) a copy of:
(A) the articles of incorporation and bylaws, or
their substantial equivalents, currently in effect;
(B) any agreements with or among underwriters;
and
(C) any indenture or other instrument governing
the issuance of the securities to be registered;
(4) a specimen or copy of the security;
(5) any other information or copies of any other
documents filed under the Securities Act of 1933 (15 U.S.C. Section
77a et seq.) the commissioner requests;
(6) an undertaking to promptly forward all amendments
to the federal registration statement other than an amendment that
delays the effective date only; and
(7) a consent to service of process conforming to the
requirements of Section 4001.102 if:
(A) the registration statement is filed by the
issuer or by a dealer that will offer the securities for sale as the
issuer's agent; and
(B) the issuer is not a resident of this state or
incorporated or formed under the laws of this state. (V.A.C.S. Art.
581-7, Subsec. C, Subdiv. (1) (part).)
Sec. 4003.103. EXAMINATION OF AND DETERMINATION ON
REGISTRATION STATEMENT. (a) In this section, "price amendment"
means the final federal amendment that includes a statement of the
offering price, underwriting and selling discounts or commissions,
amount of proceeds, conversion rates, call prices, and other
matters dependent on the offering price.
(b) The commissioner shall examine a registration statement
filed under Section 4003.102 and the accompanying documents on
receipt.
(c) The commissioner may enter an order denying
registration of the securities to be registered under the
registration statement if after the examination the commissioner
determines that the registrant has not proven that:
(1) the proposed plan of business of the issuer of the
securities is fair, just, and equitable;
(2) any consideration paid or to be paid by promoters
for the securities is fair, just, and equitable if that
consideration is less than the proposed offering price to the
public; and
(3) the securities the registrant proposes to issue
and the methods to be used by the registrant in issuing and
disposing of the securities will not work a fraud upon the purchaser
of the securities.
(d) If the commissioner enters an order denying the
registration of securities under this subchapter, the commissioner
shall notify the registrant immediately.
(e) A registration statement under this subchapter becomes
effective automatically at the moment the federal registration
statement becomes effective if all of the following conditions are
satisfied:
(1) the commissioner has not entered an order denying
registration of the securities;
(2) the registration statement has been on file with
the commissioner for at least 10 days; and
(3) a statement of the maximum and minimum proposed
offering prices and the maximum underwriting discounts and
commissions has been on file for two full business days or a shorter
period as the commissioner expressly permits and the offering is
made within those limitations.
(f) The commissioner may waive either or both of the
conditions specified in Subsections (e)(2) and (3).
(g) The registrant shall promptly:
(1) notify the commissioner by telephone or telegram
of the date and time when the federal registration statement became
effective and the content of any price amendment; and
(2) file a post-effective amendment containing the
information and documents in the price amendment.
(h) The commissioner may enter a stop order, without notice
or hearing, retroactively denying effectiveness to or suspending
effectiveness of the registration statement until the registrant
complies with this subchapter if the commissioner:
(1) does not receive the notification and
post-effective amendment required under Subsection (g); and
(2) promptly notifies the registrant by telephone or
telegram of the issuance of the stop order, and promptly confirms by
letter or telegram if the commissioner notifies by telephone.
(i) A stop order entered under Subsection (h) is void from
the time of the order's entry if the registrant proves compliance
with the notice and post-effective amendment requirements of this
section.
(j) If the federal registration statement becomes effective
before all conditions under this section are satisfied and the
conditions are not waived, the registration statement becomes
effective automatically when all the conditions are satisfied.
(k) If the registrant advises the commissioner of the date
the federal registration statement is expected to become effective,
the commissioner shall promptly advise the registrant by telephone
or telegram, at the registrant's expense, whether all the
conditions are satisfied and whether the commissioner then
contemplates the issuance of an order denying registration. This
advice by the commissioner does not preclude the issuance of the
order at any time. (V.A.C.S. Art. 581-7, Subsec. C, Subdiv. (2)
(part); Art. 581-10, Subsec. B (part).)
Sec. 4003.104. TERM OF REGISTRATION. (a) Except as
provided by this section, a registration by coordination of
securities under this subchapter is effective until the first
anniversary of the date the commissioner declares the registration
to be effective.
(b) The initial registration by coordination of securities
of an open-end investment company, as defined by the Investment
Company Act of 1940 (15 U.S.C. Section 80a-1 et seq.), is effective
until two months after the end of the issuer's fiscal year.
(c) The registration by coordination of securities of a unit
investment trust, as defined by the Investment Company Act of 1940
(15 U.S.C. Section 80a-1 et seq.), is effective until the first
anniversary of the date of effectiveness granted by the Securities
and Exchange Commission. (V.A.C.S. Art. 581-7, Subsec. C, Subdiv.
(3) (part).)
Sec. 4003.105. RENEWAL OF REGISTRATION. (a) Except as
provided by Subsection (b) and subject to Subsection (c), a
registration of securities under Section 4003.104 may be renewed
for additional periods of one year if the appropriate registration
forms and renewal fees are received before the expiration date of
the registration to be renewed.
(b) Subject to Subsection (c), for renewal of the initial
registration of securities described by Section 4003.104(b), the
issuer or the issuer's agent may renew the registration by
submitting the appropriate registration forms and renewal fees not
later than two months after the end of the issuer's fiscal year.
(c) The same standards of fairness, justice, and equity
prescribed by this subchapter for original approval of a
registration apply to the renewal of the registration. (V.A.C.S.
Art. 581-7, Subsec. C, Subdivs. (3) (part), (4).)
SUBCHAPTER D. PROHIBITED SALES
Sec. 4003.151. CERTAIN SALES PROHIBITED. If the sale of a
security entitles the purchaser or subsequent holder to exchange
that security for another, or to purchase another security, the
sale of, including an exchange for, the other security may not be
made unless the sale is authorized under this title, if not exempt
under this title, or by another provision of law. (V.A.C.S. Art.
581-4, Subsec. E (part).)
SUBCHAPTER E. REGULATION OF OFFERS
Sec. 4003.201. DEFINITION. In this subchapter, "broadcast
offer" means an offer disseminated by radio, television, recorded
telephone presentation, or other mass media. (V.A.C.S. Art. 581-22,
Subsecs. A (part), B (part).)
Sec. 4003.202. APPLICABILITY. This subchapter does not
apply to transactions or securities exempt under Chapter 4005.
(V.A.C.S. Art. 581-22, Subsec. E.)
Sec. 4003.203. AUTHORIZED WRITTEN, PRINTED, OR BROADCAST
OFFERS. A person may make in this state a written or printed offer,
including a pictorial demonstration with any accompanying script,
or broadcast offer to sell a security if:
(1) a copy of the offer is filed with the commissioner
not later than the 10th day after the date of the offer's first use
in this state;
(2) the person making or distributing the offer is a
registered dealer or registered agent of a registered dealer;
(3) either:
(A) the security is registered under Subchapter B
or C or the commissioner has issued a permit qualifying securities
for sale for the security under Subchapter A; or
(B) an application for registration under
Subchapter B or C or for a permit under Subchapter A has been filed
with the commissioner;
(4) for a registration for the security that has not
become effective under Subchapter B or C or for a permit that has
not been issued under Subchapter A, the offer prominently states on
the first page of a written or printed offer or as a preface to any
pictorial or broadcast offer either:
(A) "INFORMATIONAL ADVERTISING ONLY.
THE SECURITIES HEREIN DESCRIBED HAVE NOT BEEN QUALIFIED OR
REGISTERED FOR SALE IN TEXAS. ANY REPRESENTATION TO THE CONTRARY OR
CONSUMMATION OF SALE OF THESE SECURITIES IN TEXAS PRIOR TO
QUALIFICATION OR REGISTRATION THEREOF IS A CRIMINAL OFFENSE."; or
(B) other language required by the Securities and
Exchange Commission that in the commissioner's opinion will inform
investors that the securities may not yet be sold;
(5) the person making or distributing the offer in
this state:
(A) has not received written notice of an order
prohibiting the offer under Section 4007.101 or 4007.102; or
(B) has received notice of an order described by
Paragraph (A) but the order is no longer in effect; and
(6) payment is not accepted from the offeree and no
contract of sale is made before registration of the security is
effective under Subchapter B or C or a permit is issued under
Subchapter A. (V.A.C.S. Art. 581-22, Subsec. A (part).)
Sec. 4003.204. AUTHORIZED ORAL OFFERS. (a) In this
section, "oral offer" means an offer that is not a broadcast offer.
(b) A person may make in this state an oral offer to sell a
security in person, by telephone, or by other direct individual
communication if:
(1) the person making the offer is a registered dealer
or registered agent of a registered dealer;
(2) either:
(A) the security is registered under Subchapter B
or C or the commissioner has issued a permit qualifying securities
for sale for the security under Subchapter A; or
(B) an application for registration under
Subchapter B or C or for a permit under Subchapter A has been filed
with the commissioner;
(3) the person making or distributing the offer:
(A) has not received written notice of an order
prohibiting the offer under Section 4007.101 or 4007.102; or
(B) has received notice of an order described by
Paragraph (A) but the order is no longer in effect; and
(4) payment is not accepted from the offeree and no
contract of sale is made before registration of the security is
effective under Subchapter B or C or a permit is issued under
Subchapter A. (V.A.C.S. Art. 581-22, Subsec. B (part).)
Sec. 4003.205. DEALER NAMED IN OFFER. A dealer whose name
is included in a written, printed, or broadcast offer along with the
name of a registered dealer is not deemed, on that fact alone, to
have made an offer in this state to sell a security. (V.A.C.S. Art.
581-22, Subsec. F.)
Sec. 4003.206. EFFECT OF COMPLIANCE OR NONCOMPLIANCE. (a)
An offer to sell a security that complies with Section 4003.203 or
4003.204 does not violate Subchapter A, B, or C.
(b) An offer to sell a security that does not comply with
Section 4003.203 or 4003.204 violates this title. (V.A.C.S. Art.
581-22, Subsecs. C, D.)
SUBCHAPTER F. CROWDFUNDING
Sec. 4003.251. DEFINITION. In this subchapter, "authorized
small business development entity" means:
(1) a Type A corporation authorized under Chapter 504,
Local Government Code;
(2) a Type B corporation authorized under Chapter 505,
Local Government Code;
(3) a nonprofit organization authorized by an agency
or authority of the federal government to distribute housing and
community development block grants;
(4) a municipal corporation;
(5) the Texas Veterans Commission; or
(6) a nonprofit community development financial
institution certified by the Community Development Financial
Institutions Fund. (V.A.C.S. Art. 581-44, Subsec. (c).)
Sec. 4003.252. CROWDFUNDING. (a) The board shall adopt
rules to regulate and facilitate online intrastate crowdfunding
applicable to authorized small business development entities. The
board may create other requirements necessary to carry out this
subchapter.
(b) The rules must:
(1) allow an authorized small business development
entity to list on the entity's web portal offerings of securities by
issuers in which the entity is financially interested;
(2) allow an authorized small business development
entity and the entity's web portal to list offerings of securities
without offering investment advice;
(3) allow an authorized small business development
entity to subcontract the operations of a crowdfunding web portal
to a third party as permitted by board rule; and
(4) limit the offerings of securities on an authorized
small business development entity's web portal to securities of
issuers located within the service area of the entity. (V.A.C.S.
Art. 581-44, Subsecs. (a), (b).)
SUBCHAPTER G. PROTECTION FOR PURCHASERS OF SECURITIES
Sec. 4003.301. DEPOSIT IN TRUST ACCOUNT. (a) If the
commissioner considers it necessary to protect the interests of
prospective purchasers of securities a company sells or offers for
sale, the commissioner may require the company to deposit in a trust
account at a bank or trust company approved by the commissioner and
doing business in this state:
(1) all or part of the proposed securities; or
(2) subject to Subsection (b), all or part of the money
and other funds received from the sale of those securities.
(b) A company is not required to deposit funds received from
the sale of securities in a trust account to the extent the
commissioner considers the funds necessary to be used, provided
that the amount of the funds the company is not required to deposit
does not exceed the amount allowed as expenses and commissions for
the sale of the securities.
(c) The funds must remain on deposit until the proposed or
existing company sells a specified monetary amount or number of
shares of the securities that in the commissioner's opinion will
reasonably assure the public's protection.
(d) When the commissioner makes a written determination
that the terms of the escrow agreement have been fully met, the bank
or trust company in which the funds of a proposed or existing
corporation are deposited in a trust account as provided by this
section shall transfer to the corporation and the corporation's
executive officers the funds to allow the corporation to use the
securities or money in the corporation's business.
(e) If a proposed or existing company that deposits funds in
a trust account as provided by this section does not sell the
minimum amount of capital necessary under the escrow agreement
within two years, the commissioner may authorize the bank or trust
company at which the funds are deposited to return to the
subscribers the portion of the funds that were deposited or
escrowed under the escrow agreement. The bank or trust company
shall return the funds to the subscribers on receipt of
authorization from the commissioner under this subsection. If the
bank or trust company holds securities under the escrow agreement,
the bank or trust company may return the securities to the
corporation only after the bank or trust company receives from the
issuer evidence of cancellation thereof.
(f) A dealer or issuer of securities shall provide to the
commissioner and the bank or trust company at the time the dealer or
issuer makes the deposit required by this section:
(1) the names of the purchasers of or subscribers for
the securities; and
(2) the amount of money paid by each. (V.A.C.S. Art.
581-9, Subsec. A.)
Sec. 4003.302. MARKETING EXPENSES. (a) Total expenses for
marketing securities, including all commissions for the sale of the
securities, and all other incidental selling expenses, may not in
the aggregate exceed 20 percent of the price at which the stock or
other securities of a proposed or existing company are to be sold or
offered for sale to the public of this state.
(b) The commissioner may reduce the percentage listed in
Subsection (a) to a percentage that in the commissioner's opinion
is fair, just, and equitable under the facts of the particular case.
(V.A.C.S. Art. 581-9, Subsec. B.)
Sec. 4003.303. PROSPECTUS REQUIRED FOR CERTAIN OFFERS. (a)
Except as provided by Subsection (b), the commissioner shall
require that, in connection with a permit qualifying securities for
sale, all offers for the sale of the securities be made through a
prospectus that:
(1) fairly discloses the material facts about the plan
of finance and business; and
(2) must be filed with and approved by the
commissioner.
(b) The prospectus requirements of this section are
satisfied if the applicant files a prospectus or offering circular
with the commissioner that is also filed with the Securities and
Exchange Commission under the Securities Act of 1933 (15 U.S.C.
Section 77a et seq.) or the regulations under that law.
(c) Failure to comply with the prospectus requirements of
this section violates this title. (V.A.C.S. Art. 581-9, Subsec. C.)
Sec. 4003.304. INVESTOR EDUCATION. (a) The commissioner,
with board approval, shall develop and implement investor education
initiatives to inform the public about the basics of investing in
securities. The initiatives must place a special emphasis on the
prevention and detection of securities fraud. Materials developed
for and distributed as part of the initiatives must be published in
both English and Spanish.
(b) In developing and implementing the initiatives, the
commissioner shall use the commissioner's best efforts to
collaborate with public or nonprofit entities with an interest in
investor education.
(c) For use in providing investor education initiatives and
subject to Chapter 575, the commissioner may accept grants and
donations from:
(1) a person who is not affiliated with the securities
industry; or
(2) a nonprofit association, regardless of whether the
entity is affiliated with the securities industry. (V.A.C.S. Art.
581-43.)
CHAPTER 4004. REGULATION OF DEALERS, INVESTMENT ADVISERS, DEALERS'
AGENTS, AND INVESTMENT ADVISER REPRESENTATIVES
SUBCHAPTER A. GENERAL PROVISIONS
Sec. 4004.001. RULES FOR EXEMPTION FROM REGISTRATION
REQUIREMENTS
Sec. 4004.002. CERTAIN DISPLAYS OR ADVERTISEMENT OF
REGISTRATION PROHIBITED
Sec. 4004.003. DISPLAY OF INFORMATION REGARDING
COMPLAINTS
SUBCHAPTER B. REGISTRATION OF DEALERS AND INVESTMENT ADVISERS
Sec. 4004.051. REGISTRATION OF DEALERS REQUIRED
Sec. 4004.052. REGISTRATION OF INVESTMENT ADVISERS
REQUIRED
Sec. 4004.053. APPLICATION FOR REGISTRATION
Sec. 4004.054. ISSUANCE OF REGISTRATION CERTIFICATE
Sec. 4004.055. FORM AND CONTENTS OF REGISTRATION
CERTIFICATE
Sec. 4004.056. TEMPORARY PERMISSION TO ENGAGE IN
BUSINESS AS DEALER OR INVESTMENT
ADVISER
Sec. 4004.057. AMENDMENT OF REGISTRATION CERTIFICATE
Sec. 4004.058. POSTING REGISTRATION CERTIFICATES
SUBCHAPTER C. REGISTRATION OF AGENTS AND INVESTMENT ADVISER
REPRESENTATIVES
Sec. 4004.101. REGISTRATION OF AGENTS
Sec. 4004.102. REGISTRATION OF INVESTMENT ADVISER
REPRESENTATIVES
Sec. 4004.103. APPLICATION FOR REGISTRATION
Sec. 4004.104. ISSUANCE OF EVIDENCE OF REGISTRATION
Sec. 4004.105. FORM AND CONTENTS OF EVIDENCE OF
REGISTRATION
Sec. 4004.106. CANCELLATION OF REGISTRATION
SUBCHAPTER D. EXAMINATION REQUIREMENTS
Sec. 4004.151. EXAMINATION REQUIREMENTS
Sec. 4004.152. EXAMINATION RESULTS
SUBCHAPTER E. DENIAL OR REVOCATION OF REGISTRATION
Sec. 4004.201. DENIAL OF REGISTRATION
Sec. 4004.202. AUTOMATIC REVOCATION OF REGISTRATION OF
AGENTS AND INVESTMENT ADVISER
REPRESENTATIVES AFTER REVOCATION OF
REGISTRATION OF DEALER OR INVESTMENT
ADVISER
SUBCHAPTER F. EXPIRATION AND RENEWAL OF REGISTRATION
Sec. 4004.251. EXPIRATION OF REGISTRATION
Sec. 4004.252. RENEWAL OF REGISTRATION
Sec. 4004.253. STAGGERED RENEWAL; PRORATION OF
REGISTRATION RENEWAL FEE
Sec. 4004.254. NOTICE OF EXPIRATION REQUIRED
Sec. 4004.255. RENEWAL OF EXPIRED REGISTRATION
Sec. 4004.256. EFFECT OF EXPIRED REGISTRATION
Sec. 4004.257. CONTINUING EDUCATION
SUBCHAPTER G. NOTICE FILINGS OF FEDERAL COVERED INVESTMENT
ADVISERS AND CERTAIN REPRESENTATIVES OF FEDERAL COVERED INVESTMENT
ADVISERS
Sec. 4004.301. APPLICABILITY
Sec. 4004.302. NOTICE FILING
Sec. 4004.303. EFFECTIVE DATE OF NOTICE FILING
Sec. 4004.304. RENEWAL
SUBCHAPTER H. REQUIREMENTS FOR PROTECTION OF VULNERABLE ADULTS
FROM FINANCIAL EXPLOITATION
Sec. 4004.351. DEFINITIONS
Sec. 4004.352. REPORTING SUSPECTED FINANCIAL
EXPLOITATION OF VULNERABLE ADULTS
Sec. 4004.353. FORM AND CONTENT OF REPORT
Sec. 4004.354. NOTIFYING THIRD PARTIES OF SUSPECTED
FINANCIAL EXPLOITATION OF VULNERABLE
ADULTS
Sec. 4004.355. TEMPORARY HOLD ON TRANSACTIONS IN
CERTAIN CASES OF SUSPECTED FINANCIAL
EXPLOITATION OF VULNERABLE ADULTS
Sec. 4004.356. IMMUNITY
Sec. 4004.357. RECORDS
CHAPTER 4004. REGULATION OF DEALERS, INVESTMENT ADVISERS, DEALERS'
AGENTS, AND INVESTMENT ADVISER REPRESENTATIVES
SUBCHAPTER A. GENERAL PROVISIONS
Sec. 4004.001. RULES FOR EXEMPTION FROM REGISTRATION
REQUIREMENTS. The board may adopt rules that exempt certain
classes of persons from the dealer, agent, investment adviser, and
investment adviser representative registration requirements, or
provide conditional exemptions from registration, if the board
determines that the rules are consistent with the purposes of this
title. (V.A.C.S. Art. 581-12, Subsec. C.)
Sec. 4004.002. CERTAIN DISPLAYS OR ADVERTISEMENT OF
REGISTRATION PROHIBITED. Except as expressly provided by this
title, a dealer, agent, investment adviser, or investment adviser
representative may not by public display or advertisement use the
fact that the person is registered under this title, the person's
registration certificate or evidence of registration, or a
certified copy of the certificate or evidence of registration in
connection with any sale or effort to sell any security or any
rendering of services as an investment adviser. (V.A.C.S. Art.
581-20.)
Sec. 4004.003. DISPLAY OF INFORMATION REGARDING
COMPLAINTS. A dealer, agent, investment adviser, or investment
adviser representative regulated under this title shall
prominently display at all times in the person's place of business:
(1) a sign containing the name, mailing address, and
telephone number of the board; and
(2) a statement informing consumers that complaints
against a dealer, agent, investment adviser, or investment adviser
representative may be directed to the board. (V.A.C.S. Art. 581-2,
Subsec. L (part).)
SUBCHAPTER B. REGISTRATION OF DEALERS AND INVESTMENT ADVISERS
Sec. 4004.051. REGISTRATION OF DEALERS REQUIRED. Except as
provided by Section 4001.056(d) or Subchapter A, Chapter 4005, a
dealer or other person or company, including a corporation or firm,
may not, directly or through the dealer's or other person's or
company's agents, offer for sale, sell, or make a sale of any
securities in this state unless the dealer or other person or
company is first registered as provided by this chapter. (V.A.C.S.
Art. 581-12, Subsec. A (part).)
Sec. 4004.052. REGISTRATION OF INVESTMENT ADVISERS
REQUIRED. Except as provided by Subchapter A, Chapter 4005, a
person may not, directly or through the person's investment adviser
representative, render services as an investment adviser in this
state unless the person:
(1) is registered under this chapter;
(2) submits a notice filing as provided by Subchapter
G; or
(3) is otherwise exempt under this title. (V.A.C.S.
Art. 581-12, Subsec. B (part).)
Sec. 4004.053. APPLICATION FOR REGISTRATION. (a) To be
registered, a dealer or investment adviser must submit to the
commissioner a sworn application that must be in the form the
commissioner prescribes and must state:
(1) the applicant's principal place of business;
(2) the location of the applicant's principal place of
business and all branch offices of the applicant in this state;
(3) the name or style of doing business and the address
of the applicant;
(4) the name, residence, and business address of each
person interested in the business as a principal, officer,
director, or managing agent of the applicant's business, specified
by capacity and title;
(5) the general plan and character of the applicant's
business;
(6) the period the applicant has been engaged in the
business; and
(7) the places at which the applicant has engaged in
the business.
(b) An application filed under this section must contain
additional information relating to the previous history, record,
associations, and present financial condition of the applicant as
the commissioner may require or as necessary to enable the
commissioner to determine whether the sale of any securities the
applicant proposes to issue or deal in would result in fraud.
(c) An application must be accompanied by a certificate or
other evidence satisfactory to the commissioner that establishes
the good reputation of:
(1) the applicant; and
(2) the directors, officers, copartners, or
principals of the applicant.
(d) For an applicant that is a corporation organized under
the laws of another state, territory, or government or that will
have the applicant's principal place of business therein, the
application must be accompanied by a copy of the corporation's:
(1) articles of incorporation or similar
organizational instrument, and all amendments to the document or
instrument, as applicable, certified by the appropriate officer of
the corporation or of the state or other jurisdiction in which the
corporation is organized;
(2) regulations; and
(3) bylaws.
(e) For an applicant that is a limited partnership, the
application must be accompanied by either:
(1) a copy of the articles of copartnership or similar
organizational instrument of the partnership; or
(2) a verified statement of the partnership's plan of
doing business.
(f) For an applicant that is an unincorporated association
or organization under the laws of another state, territory, or
government or is an unincorporated association or organization that
has its principal place of business therein, the application must
be accompanied by a copy of the association's or organization's
articles of association, trust agreement, or other form of
organization.
(g) The commissioner shall:
(1) prescribe the application form to be used by an
applicant under this section; and
(2) provide copies of the application form for
registration to all persons who seek to submit an application to
register as a dealer or investment adviser. (V.A.C.S. Art. 581-13,
Subsecs. A, B, C, G, H, I, J.)
Sec. 4004.054. ISSUANCE OF REGISTRATION CERTIFICATE. The
commissioner shall issue a certificate of registration to an
applicant for registration as a dealer or investment adviser if:
(1) the commissioner is satisfied that the applicant
has complied with the requirements of this chapter; and
(2) the applicant:
(A) if applicable, has filed a written consent to
service that complies with Section 4001.102; and
(B) has paid the fees required by Chapter 4006.
(V.A.C.S. Art. 581-15 (part).)
Sec. 4004.055. FORM AND CONTENTS OF REGISTRATION
CERTIFICATE. The registration certificate must be in the form the
commissioner prescribes and must state:
(1) the principal place of business and address of the
dealer or investment adviser;
(2) the name and business address of each person
interested in the business as a principal, officer, director, or
managing agent of the dealer or investment adviser; and
(3) that the dealer or investment adviser has been
registered for a current calendar year as a dealer in securities or
as an investment adviser, as appropriate. (V.A.C.S. Arts. 581-15
(part), 581-17 (part).)
Sec. 4004.056. TEMPORARY PERMISSION TO ENGAGE IN BUSINESS
AS DEALER OR INVESTMENT ADVISER. (a) Pending final disposition of
an application under this subchapter, the commissioner may, for
special cause shown, grant an applicant temporary permission to
engage in business as a dealer or investment adviser under this
title, subject to any terms and conditions that the commissioner
prescribes.
(b) Temporary permission granted by the commissioner under
this section may be revoked at any time.
(c) A dealer or investment adviser acting under temporary
permission granted under this section is considered to be a
registered dealer or registered investment adviser for any purpose
of this title. (V.A.C.S. Art. 581-15 (part).)
Sec. 4004.057. AMENDMENT OF REGISTRATION CERTIFICATE. (a)
A dealer or investment adviser shall immediately certify under oath
to the commissioner any change in the personnel of a partnership or
in the principals, officers, directors, or managing agents of the
dealer or investment adviser.
(b) A change in the registration certificate required as the
result of a change described by Subsection (a) may be made at any
time by submitting to the commissioner a written application that
specifies the reason for the change.
(c) On the issuance of an amended registration certificate,
the dealer or investment adviser shall promptly surrender the
original certificate and any outstanding certified copies of the
original certificate to the commissioner. (V.A.C.S. Art. 581-17
(part).)
Sec. 4004.058. POSTING REGISTRATION CERTIFICATES. On
receipt of a registration certificate issued under this chapter,
the dealer or investment adviser named in the certificate shall
immediately post and conspicuously display the certificate at all
times in the dealer's or investment adviser's principal place of
business, if the dealer's or investment adviser's principal place
of business is maintained in this state. The dealer or investment
adviser shall similarly post and conspicuously display a duplicate
copy of the dealer's or investment adviser's certificate in each
branch office located in this state. (V.A.C.S. Art. 581-21.)
SUBCHAPTER C. REGISTRATION OF AGENTS AND INVESTMENT ADVISER
REPRESENTATIVES
Sec. 4004.101. REGISTRATION OF AGENTS. (a) An agent may
not, on behalf of a registered dealer, sell, offer for sale, or make
a sale of any securities in this state unless the agent is
registered as an agent for that particular registered dealer under
this chapter.
(b) On written application by a registered dealer, and on
satisfactory compliance with the requirements of this title, the
commissioner shall register a person as an agent of the registered
dealer. (V.A.C.S. Art. 581-12, Subsec. A (part); Art. 581-18
(part).)
Sec. 4004.102. REGISTRATION OF INVESTMENT ADVISER
REPRESENTATIVES. (a) A person may not act or render services as an
investment adviser representative for an investment adviser in this
state unless the person is registered or submits a notice filing as
an investment adviser representative for that particular
investment adviser as provided by this subchapter and Subchapter G.
(b) On written application by an investment adviser and on
satisfactory compliance with the requirements of this title, the
commissioner shall register a person as an investment adviser
representative of that investment adviser. (V.A.C.S. Art. 581-12,
Subsec. B (part); Art. 581-18 (part).)
Sec. 4004.103. APPLICATION FOR REGISTRATION. The
application described by Sections 4004.101 and 4004.102 must:
(1) be in the form the commissioner prescribes;
(2) state:
(A) the residence and address of the person whose
registration as an agent or investment adviser representative is
requested through the application; and
(B) any other information relating to that
person's previous history, record, and associations that the
commissioner may require; and
(3) be signed and sworn to by the person whose
registration as an agent or investment adviser representative is
requested through the application. (V.A.C.S. Art. 581-18 (part).)
Sec. 4004.104. ISSUANCE OF EVIDENCE OF REGISTRATION. For
each person registered under this subchapter, the commissioner
shall issue evidence of registration of the agent or investment
adviser representative to the registered dealer or investment
adviser who requested the person's registration, as appropriate.
The registered dealer or investment adviser who requested the
person's registration shall retain the evidence of registration for
the dealer's agents or investment adviser's representatives, as
appropriate. (V.A.C.S. Art. 581-18 (part).)
Sec. 4004.105. FORM AND CONTENTS OF EVIDENCE OF
REGISTRATION. The evidence of registration described by Section
4004.104 must:
(1) be in the form the commissioner prescribes; and
(2) state:
(A) the name of the agent or investment adviser
representative;
(B) the address of the registered dealer or
investment adviser, as appropriate; and
(C) that the person is registered for the current
calendar year as an agent of the dealer or as an investment adviser
representative of the investment adviser, as appropriate.
(V.A.C.S. Art. 581-18 (part).)
Sec. 4004.106. CANCELLATION OF REGISTRATION. On
application by a registered dealer or investment adviser, the
commissioner shall cancel the registration of the registered
dealer's agent or the investment adviser's representative.
(V.A.C.S. Art. 581-18 (part).)
SUBCHAPTER D. EXAMINATION REQUIREMENTS
Sec. 4004.151. EXAMINATION REQUIREMENTS. (a) Except as
provided by Subsection (c), the commissioner shall require that, to
be registered under this chapter, each applicant must pass a
written examination to determine whether the applicant possesses
the qualifications and competency to engage in the business of
dealing in and selling securities as a dealer or agent, or rendering
services as an investment adviser or investment adviser
representative. If the applicant is a corporation or partnership,
the officers, directors, or partners to be licensed by the
corporation or partnership must pass the written examination
described by this section.
(b) The commissioner may accept some or all of the
examinations administered by securities self-regulatory
organizations to fulfill the examination requirements of this
section.
(c) The board may waive the examination requirement under
Subsection (a) for any applicant or class of applicants. (V.A.C.S.
Art. 581-13, Subsecs. D, K.)
Sec. 4004.152. EXAMINATION RESULTS. (a) Except as
provided by Subsection (b), the board shall notify each examinee of
the results of a registration examination required by this
subchapter not later than the 30th day after the date the examinee
takes the examination.
(b) If an examination is graded or reviewed by a testing
service:
(1) the board shall notify each examinee of the
results of the examination not later than the 14th day after the
date the board receives the results from the testing service; and
(2) if notice of the examination results will be
delayed for longer than 90 days after the examination date, the
board shall notify each examinee of the reason for the delay before
the 90th day.
(c) The board may require a testing service to notify an
examinee of the results of the examination.
(d) If requested in writing by an examinee who fails an
examination administered under this subchapter, the board shall
provide the examinee with an analysis of the examinee's performance
on the examination. (V.A.C.S. Art. 581-13, Subsecs. E, F.)
SUBCHAPTER E. DENIAL OR REVOCATION OF REGISTRATION
Sec. 4004.201. DENIAL OF REGISTRATION. The commissioner
may deny an application for registration under this chapter in
accordance with Section 4007.105. (New.)
Sec. 4004.202. AUTOMATIC REVOCATION OF REGISTRATION OF
AGENTS AND INVESTMENT ADVISER REPRESENTATIVES AFTER REVOCATION OF
REGISTRATION OF DEALER OR INVESTMENT ADVISER. (a) The revocation
of the registration of a dealer or an investment adviser under
Section 4007.105 constitutes a revocation of the registration of
any agent of the dealer or of any investment adviser representative
of the investment adviser, as appropriate.
(b) The commissioner shall promptly send notice of the
revocation of the registration of a dealer or of an investment
adviser to each applicable agent or investment adviser
representative.
(c) All evidences of registration that have been revoked
shall be immediately surrendered to the commissioner on request.
(V.A.C.S. Art. 581-25 (part).)
SUBCHAPTER F. EXPIRATION AND RENEWAL OF REGISTRATION
Sec. 4004.251. EXPIRATION OF REGISTRATION. Except as
provided by Sections 4004.252(a) and 4004.253, all registrations
expire at the end of the calendar year. (V.A.C.S. Art. 581-19,
Subsec. A (part).)
Sec. 4004.252. RENEWAL OF REGISTRATION. (a) A person may
renew an unexpired registration by filing a renewal application in
the form the commissioner prescribes and by paying the required
renewal fee to the board before the registration's expiration date.
(b) New registrations for the year succeeding the
expiration of registrations shall be issued on the filing of a
written application and payment of the fee as provided by this
subchapter. If an applicant registers after December 1 of any year,
the applicant may immediately apply for a renewal of the
applicant's registration for the ensuing year.
(c) The filing of additional statements or the provision of
additional information is not required for renewal unless
specifically requested by the commissioner. (V.A.C.S. Art. 581-19,
Subsecs. A (part), C, Subdiv. (1).)
Sec. 4004.253. STAGGERED RENEWAL; PRORATION OF
REGISTRATION RENEWAL FEE. (a) The board by rule may adopt a system
under which registrations expire on various dates during the year.
(b) For the year in which the registration expiration date
is changed, registration fees payable after the 60th day and before
the 30th day before January 1 of the next year shall be prorated on a
monthly basis so that each person pays only that portion of the
registration fee that is allocable to the number of months during
which the registration is valid. On renewal of the registration on
the new expiration date, the total registration renewal fee is
payable. (V.A.C.S. Art. 581-19, Subsec. B.)
Sec. 4004.254. NOTICE OF EXPIRATION REQUIRED. Not later
than the 30th day before the date a person's registration is
scheduled to expire, the commissioner shall send written notice of
the impending expiration to the person at the person's last known
address according to the board's records. (V.A.C.S. Art. 581-19,
Subsec. C, Subdiv. (5).)
Sec. 4004.255. RENEWAL OF EXPIRED REGISTRATION. (a) A
person whose registration has been expired for 90 days or less may
renew the registration by:
(1) filing a renewal application with the
commissioner; and
(2) paying to the board:
(A) the required renewal fee; and
(B) a fee that is equal to one-half of the
original registration application fee.
(b) A person whose registration has been expired for more
than 90 days but less than two years may renew the registration by:
(1) filing a renewal application with the
commissioner; and
(2) paying to the board:
(A) all unpaid renewal fees; and
(B) a fee that is equal to the original
registration application fee.
(c) A person whose registration has been expired for two
years or more may not renew the registration. The person may obtain
a new registration by complying with the requirements and
procedures, including the examination requirements, for obtaining
an original registration. The person must pay to the board a fee
that is equal to the original registration application fee.
(V.A.C.S. Art. 581-19, Subsec. C, Subdivs. (2), (3), (4).)
Sec. 4004.256. EFFECT OF EXPIRED REGISTRATION. A person
who sells securities or who renders investment advising services
after the person's registration has expired but before the
registration is renewed is subject to the sanctions provided by
this title for selling securities or rendering investment advice
without being registered. (V.A.C.S. Art. 581-19, Subsec. C,
Subdiv. (6).)
Sec. 4004.257. CONTINUING EDUCATION. (a) The board may
recognize, prepare, or administer continuing education programs
for a person who is registered under this chapter.
(b) A person who is registered under this chapter must
participate in continuing education programs if the board requires
participation as a condition of maintaining the person's
certificate or evidence of registration. (V.A.C.S. Art. 581-19,
Subsec. D.)
SUBCHAPTER G. NOTICE FILINGS OF FEDERAL COVERED INVESTMENT
ADVISERS AND CERTAIN REPRESENTATIVES OF FEDERAL COVERED INVESTMENT
ADVISERS
Sec. 4004.301. APPLICABILITY. This subchapter does not
apply to an investment adviser or investment adviser representative
who is exempt from registration under this title or by board rule.
(V.A.C.S. Art. 581-12-1, Subsec. A.)
Sec. 4004.302. NOTICE FILING. The board by rule shall
authorize a federal covered investment adviser or a representative
of a federal covered investment adviser to render services as an
investment adviser in this state if the commissioner receives:
(1) a notice filing submitted by the adviser or
representative that:
(A) is on the form and contains the information
the commissioner prescribes; and
(B) if applicable, contains a consent to service
appointing the commissioner as the adviser's attorney for service
of process, as required by Section 4001.102; and
(2) a notice filing fee in the amount determined under
Chapter 4006. (V.A.C.S. Art. 581-12-1, Subsec. B.)
Sec. 4004.303. EFFECTIVE DATE OF NOTICE FILING. On the
commissioner's receipt of a notice filing and fee payment that meet
the requirements of Section 4004.302, the notice filing takes
effect and is valid for the remainder of the calendar year.
(V.A.C.S. Art. 581-12-1, Subsec. C (part).)
Sec. 4004.304. RENEWAL. A federal covered investment
adviser or a representative of a federal covered investment adviser
may renew a notice filing on or before the filing's expiration date
if the commissioner receives:
(1) a renewal notice filing submitted by the adviser
or representative; and
(2) a renewal fee in the amount determined under
Chapter 4006. (V.A.C.S. Art. 581-12-1, Subsec. C (part).)
SUBCHAPTER H. REQUIREMENTS FOR PROTECTION OF VULNERABLE ADULTS
FROM FINANCIAL EXPLOITATION
Sec. 4004.351. DEFINITIONS. In this subchapter:
(1) "Department" means the Department of Family and
Protective Services.
(2) "Exploitation," "financial exploitation," and
"vulnerable adult" have the meanings assigned by Section 280.001,
Finance Code.
(3) "Securities professional" means an agent, an
investment adviser representative, or a person who serves in a
supervisory or compliance capacity for a dealer or investment
adviser. (V.A.C.S. Art. 581-45, Subsec. A.)
Sec. 4004.352. REPORTING SUSPECTED FINANCIAL EXPLOITATION
OF VULNERABLE ADULTS. (a) If a securities professional or a person
serving in a legal capacity for a dealer or investment adviser has
cause to believe that financial exploitation of a vulnerable adult
who is an account holder with the dealer or investment adviser has
occurred, is occurring, or has been attempted, the securities
professional or person serving in a legal capacity for the dealer or
investment adviser shall notify the dealer or investment adviser of
the suspected financial exploitation.
(b) If a dealer or investment adviser is notified of
suspected financial exploitation under Subsection (a) or otherwise
has cause to believe that financial exploitation of a vulnerable
adult who is an account holder with the dealer or investment adviser
has occurred, is occurring, or has been attempted, the dealer or
investment adviser shall assess the suspected financial
exploitation and submit a report to the commissioner, in accordance
with rules adopted under Section 4004.353, and the department in
the same manner as and containing the same information required to
be included in a report under Section 48.051, Human Resources Code.
The dealer or investment adviser shall submit the reports required
by this subsection not later than the earlier of:
(1) the date the dealer or investment adviser
completes the dealer's or investment adviser's assessment of the
suspected financial exploitation; or
(2) the fifth business day after the date the dealer or
investment adviser is notified of the suspected financial
exploitation under Subsection (a) or otherwise has cause to believe
that the suspected financial exploitation has occurred, is
occurring, or has been attempted.
(c) A dealer or investment adviser who submits a report to
the department of suspected financial exploitation of a vulnerable
adult under Subsection (b) is not required to make an additional
report of suspected abuse, neglect, or exploitation under Section
48.051, Human Resources Code, for the same conduct constituting the
reported suspected financial exploitation.
(d) Each dealer and investment adviser shall adopt internal
policies, programs, plans, or procedures for:
(1) the securities professionals or persons serving in
a legal capacity for the dealer or investment adviser to make the
notification required under Subsection (a); and
(2) the dealer or investment adviser to conduct the
assessment and submit the reports required under Subsection (b).
(e) The policies, programs, plans, or procedures adopted
under Subsection (d) may authorize the dealer or investment adviser
to report the suspected financial exploitation to other appropriate
agencies and entities in addition to the commissioner and the
department, including the attorney general, the Federal Trade
Commission, and the appropriate law enforcement agency. (V.A.C.S.
Art. 581-45, Subsecs. B, C, D, E.)
Sec. 4004.353. FORM AND CONTENT OF REPORT. The board by
rule shall prescribe the form and content of the report required to
be submitted by a dealer or investment adviser to the commissioner
under Section 4004.352(b). (V.A.C.S. Art. 581-45, Subsec. N.)
Sec. 4004.354. NOTIFYING THIRD PARTIES OF SUSPECTED
FINANCIAL EXPLOITATION OF VULNERABLE ADULTS. If a dealer or
investment adviser submits reports of suspected financial
exploitation of a vulnerable adult to the commissioner and the
department under Section 4004.352(b), the dealer or investment
adviser may at the time the dealer or investment adviser submits the
reports also notify a third party reasonably associated with the
vulnerable adult of the suspected financial exploitation, unless
the dealer or investment adviser suspects the third party of
financial exploitation of the vulnerable adult. (V.A.C.S. Art.
581-45, Subsec. F.)
Sec. 4004.355. TEMPORARY HOLD ON TRANSACTIONS IN CERTAIN
CASES OF SUSPECTED FINANCIAL EXPLOITATION OF VULNERABLE ADULTS.
(a) Notwithstanding any other law, if a dealer or investment
adviser submits reports of suspected financial exploitation of a
vulnerable adult to the commissioner and the department under
Section 4004.352(b), the dealer or investment adviser:
(1) may place a hold on any transaction that:
(A) involves an account of the vulnerable adult;
and
(B) the dealer or investment adviser has cause to
believe is related to the suspected financial exploitation; and
(2) must place a hold on any transaction involving an
account of the vulnerable adult if the hold is requested by the
commissioner, the department, or a law enforcement agency.
(b) Subject to Subsection (c), a hold placed on any
transaction under Subsection (a) expires on the 10th business day
after the date the dealer or investment adviser submits the reports
under Section 4004.352(b).
(c) A dealer or investment adviser may extend a hold placed
on any transaction under Subsection (a) for a period not to exceed
30 business days after the expiration of the period prescribed by
Subsection (b) if requested by a state or federal agency or a law
enforcement agency investigating the suspected financial
exploitation. The dealer or investment adviser may also petition a
court to extend a hold placed on any transaction under Subsection
(a) beyond the period prescribed by Subsection (b). A court may
enter an order extending or shortening a hold or providing other
relief.
(d) Each dealer and investment adviser shall adopt internal
policies, programs, plans, or procedures for placing a hold on a
transaction involving an account of a vulnerable adult under
Subsection (a). (V.A.C.S. Art. 581-45, Subsecs. G, H, I, J.)
Sec. 4004.356. IMMUNITY. (a) A securities professional or
person serving in a legal capacity for a dealer or investment
adviser who makes a notification under Section 4004.352(a), a
dealer or investment adviser that submits a report under Section
4004.352(b) or makes a notification to a third party under Section
4004.354, or a securities professional or person serving in a legal
capacity who or dealer or investment adviser that testifies or
otherwise participates in a judicial proceeding arising from a
notification or report is immune from any civil or criminal
liability arising from the notification, report, testimony, or
participation in the judicial proceeding, unless the securities
professional, person serving in a legal capacity for the dealer or
investment adviser, or dealer or investment adviser acted in bad
faith or with a malicious purpose.
(b) A dealer or investment adviser that in good faith and
with the exercise of reasonable care places or does not place a hold
on any transaction under Section 4004.355(a)(1) is immune from
civil or criminal liability or disciplinary action resulting from
the action or failure to act. (V.A.C.S. Art. 581-45, Subsecs. K,
L.)
Sec. 4004.357. RECORDS. To the extent permitted by state or
federal law, a dealer or investment adviser, on request, shall
provide access to or copies of records relevant to the suspected
financial exploitation of a vulnerable adult to the commissioner,
the department, a law enforcement agency, or a prosecuting
attorney's office, either as part of a report to the commissioner,
department, law enforcement agency, or prosecuting attorney's
office or at the request of the commissioner, department, law
enforcement agency, or prosecuting attorney's office in accordance
with an investigation. (V.A.C.S. Art. 581-45, Subsec. M.)
CHAPTER 4005. EXEMPTIONS
SUBCHAPTER A. EXEMPT TRANSACTIONS
Sec. 4005.001. SCOPE OF EXEMPTION
Sec. 4005.002. COURT SUPERVISED SALES
Sec. 4005.003. PLEDGED SECURITIES
Sec. 4005.004. ISOLATED TRANSACTIONS
Sec. 4005.005. INSURANCE COMPANY SALES
Sec. 4005.006. STOCK DIVIDENDS
Sec. 4005.007. EXISTING SECURITY HOLDERS
Sec. 4005.008. FINANCIAL DISTRESS
Sec. 4005.009. MERGER, CONSOLIDATION, AND ASSET SALES
Sec. 4005.010. EXCHANGE OF SHARES
Sec. 4005.011. INSTITUTIONAL INVESTORS
Sec. 4005.012. PRIVATE LIMITED OFFERINGS
Sec. 4005.013. COMPENSATION PLANS AND CONTRACTS
Sec. 4005.014. MORTGAGES AND LIENS
Sec. 4005.015. NONPROFITS
Sec. 4005.016. FINANCIAL INSTITUTIONS
Sec. 4005.017. GOVERNMENT ISSUANCE OR GUARANTEE
Sec. 4005.018. COOPERATIVES
Sec. 4005.019. SECONDARY MARKET SALES
Sec. 4005.020. UNSOLICITED ORDERS
Sec. 4005.021. OIL, GAS, OR MINING INTERESTS
Sec. 4005.022. ISSUER SALES OF EXEMPT SECURITIES
Sec. 4005.023. OPTIONS
Sec. 4005.024. EXEMPTIONS BY RULE OR ORDER
Sec. 4005.025. ISSUANCE OR TRANSFER TO NONPROFITS
SUBCHAPTER B. EXEMPT SECURITIES
Sec. 4005.051. SCOPE OF EXEMPTION
Sec. 4005.052. RAILROADS OR UTILITIES
Sec. 4005.053. NONPROFIT CORPORATIONS
Sec. 4005.054. LISTED SECURITIES
Sec. 4005.055. COMMERCIAL PAPER
Sec. 4005.056. SECURED DEBT
Sec. 4005.057. NONPROFIT DEBT
Sec. 4005.058. SUSPENSION OF EXEMPT STATUS OF TRADING
SYSTEM
SUBCHAPTER C. PROCEDURES FOR APPROVAL OF STOCK EXCHANGE
Sec. 4005.101. APPLICATION FOR APPROVAL
Sec. 4005.102. APPROVAL OF STOCK EXCHANGE
Sec. 4005.103. INVESTIGATION AND HEARING
Sec. 4005.104. ORDER OF APPROVAL
Sec. 4005.105. WITHDRAWAL OF APPROVAL
CHAPTER 4005. EXEMPTIONS
SUBCHAPTER A. EXEMPT TRANSACTIONS
Sec. 4005.001. SCOPE OF EXEMPTION. Except as expressly
provided otherwise in this title, this title does not apply to any
sale of, offer for sale of, solicitation of, subscription to,
dealing in, or delivery of a security made in a transaction or under
a condition specified in this subchapter. (V.A.C.S. Art. 581-5
(part).)
Sec. 4005.002. COURT SUPERVISED SALES. The exemption
provided by Section 4005.001 applies to the sale of a security made:
(1) at a judicial, executor's, administrator's,
guardian's, or conservator's sale; or
(2) by a receiver or trustee in insolvency or
bankruptcy. (V.A.C.S. Art. 581-5, Subsec. A.)
Sec. 4005.003. PLEDGED SECURITIES. The exemption provided
by Section 4005.001 applies to the sale of a security pledged in
good faith as security for a bona fide debt that is made by or for
the account of a pledge holder or mortgagee that is selling the
security or offering the security for sale or delivery in the
ordinary course of business to liquidate the debt. (V.A.C.S. Art.
581-5, Subsec. B.)
Sec. 4005.004. ISOLATED TRANSACTIONS. (a) The exemption
provided by Section 4005.001 applies to the sale of a security that
is made by a vendor or on a vendor's behalf by a dealer or other
agent and is made in the ordinary course of a bona fide personal
investment of the vendor's personal holdings or a change in the
investment if:
(1) the vendor is not engaged in the business of
selling securities; and
(2) the sale is an isolated transaction not made in the
course of repeated and consecutive transactions of a like
character.
(b) A sale or offer for sale under Subsection (a) is not
exempt from this title if the sale or offer is made or intended to be
made by the vendor or the vendor's agent for the direct or indirect
benefit of a company other than the individual vendor. The usual
commission of a vendor's agent is not a benefit for the purposes of
this subsection.
(c) A person acting as an agent for a vendor in any sale or
offer for sale under Subsection (a) must be registered under this
title. (V.A.C.S. Art. 581-5, Subsec. C (part).)
Sec. 4005.005. INSURANCE COMPANY SALES. (a) The exemption
provided by Section 4005.001 applies to the sale of a security made
by or on behalf of an insurance company that:
(1) is subject to the supervision or control of the
Texas Department of Insurance; and
(2) owns the security as a legal and bona fide
investment.
(b) A sale or offer for sale under Subsection (a) is not
exempt from this title if the sale or offer is made or intended to be
made directly or indirectly for the benefit of another company.
(V.A.C.S. Art. 581-5, Subsec. C (part).)
Sec. 4005.006. STOCK DIVIDENDS. The exemption provided by
Section 4005.001 applies to a distribution of securities by a
corporation directly to the corporation's stockholders as a stock
dividend or other distribution paid out of earnings or surplus.
(V.A.C.S. Art. 581-5, Subsec. D.)
Sec. 4005.007. EXISTING SECURITY HOLDERS. (a) In this
section, "existing security holder" includes a person who is a
holder of a convertible security or nontransferable warrant at the
time of the transaction.
(b) The exemption provided by Section 4005.001 applies to an
offer by the issuer of its securities to the issuer's existing
security holders and to any transaction pursuant to the offer if no
commission or other remuneration, other than a stand-by commission,
is paid or given directly or indirectly for soliciting any security
holder in this state. (V.A.C.S. Art. 581-5, Subsec. E.)
Sec. 4005.008. FINANCIAL DISTRESS. (a) The exemption
provided by Section 4005.001 applies to the issuance in good faith
of securities by a company:
(1) to the company's security holders or creditors in
the process of a bona fide reorganization of the company made in
good faith; or
(2) to the security holders or creditors of a
predecessor company if the issuing company is organized solely for
the purpose of taking over the assets and continuing the business of
the predecessor company.
(b) The exemption provided by Section 4005.001 applies to an
issuance of securities described by Subsection (a) only if:
(1) the securities are issued in exchange for
securities of the security holders, claims of the creditors, or
both; and
(2) the security holders or creditors do not pay,
give, or promise any consideration, and are not obligated to pay or
give any consideration, for the securities issued other than the
securities of or claims against the company or the company's
predecessor held or owned by the security holders or creditors at
the time of the issuance. (V.A.C.S. Art. 581-5, Subsec. F.)
Sec. 4005.009. MERGER, CONSOLIDATION, AND ASSET SALES.
(a) The exemption provided by Section 4005.001 applies to the
issuance or sale of securities by one corporation to another
corporation or to the security holders of the corporation pursuant
to a vote by one or more classes of those security holders, as
required by the certificate of formation, certificate of
incorporation, or applicable corporation statute, in connection
with:
(1) a merger;
(2) a consolidation; or
(3) a sale of corporate assets.
(b) The exemption provided by Section 4005.001 applies to an
issuance or sale described by Subsection (a) only if the security
holders do not pay, give, or promise any consideration, and are not
obligated to pay or give any consideration, for the securities
issued or sold other than the corporation's securities held by the
security holders at the time of the issuance or sale. (V.A.C.S.
Art. 581-5, Subsec. G (part).)
Sec. 4005.010. EXCHANGE OF SHARES. (a) The exemption
provided by Section 4005.001 applies to the issuance or sale of
securities by one corporation to the corporation's stockholders in
connection with:
(1) the change of par value stock to no par value stock
or vice versa; or
(2) the exchange of outstanding shares for the same or
a greater or smaller number of shares.
(b) The exemption provided by Section 4005.001 applies to an
issuance or sale described by Subsection (a) only if the security
holders do not pay, give, or promise any consideration, and are not
obligated to pay or give any consideration, for the securities
issued or sold other than the corporation's securities held by the
security holders at the time of the issuance or sale. (V.A.C.S.
Art. 581-5, Subsec. G (part).)
Sec. 4005.011. INSTITUTIONAL INVESTORS. The exemption
provided by Section 4005.001 applies to the sale of a security to:
(1) a bank;
(2) a trust company;
(3) a building and loan association;
(4) a savings and loan association;
(5) an insurance company;
(6) a surety or guaranty company;
(7) a savings institution;
(8) an investment company as defined by the Investment
Company Act of 1940 (15 U.S.C. Section 80a-1 et seq.);
(9) a small business investment company as defined by
the Small Business Investment Act of 1958 (15 U.S.C. Section 661 et
seq.); or
(10) a registered dealer actually engaged in buying
and selling securities. (V.A.C.S. Art. 581-5, Subsec. H.)
Sec. 4005.012. PRIVATE LIMITED OFFERINGS. (a) The
exemption provided by Section 4005.001 applies to the following
sales made without any public solicitation or advertisement:
(1) the sale of a security by the issuer of the
security if the total number of security holders of the issuer does
not exceed 35 persons after the sale; or
(2) the sale by an issuer of the issuer's securities to
not more than 15 persons during the 12-month period ending with the
date of the sale if the persons purchased the securities for their
own account and not for distribution.
(b) For the purpose of determining the number of persons
under Subsection (a)(2), the following persons are not included:
(1) a purchaser of a security in a transaction exempt
under another provision of this subchapter;
(2) a purchaser of a security exempt under Subchapter
B; and
(3) a purchaser of a security that is part of an
offering registered under Subchapter A, B, or C, Chapter 4003.
(V.A.C.S. Art. 581-5, Subsec. I (part).)
Sec. 4005.013. COMPENSATION PLANS AND CONTRACTS. The
exemption provided by Section 4005.001 applies to the sale or
distribution of a security without any public solicitation or
advertisement if the sale or distribution is made:
(1) by an issuer of the security or any participating
subsidiary of the issuer; and
(2) under a bona fide thrift, savings, stock purchase,
retirement, pension, profit-sharing, option, bonus, appreciation
right, incentive, or similar written compensation plan or written
compensation contract established by the issuer or the issuer's
subsidiary for the benefit of:
(A) employees, directors, general partners,
managers, or officers of the issuer or subsidiary;
(B) the issuer's or subsidiary's trustees, if the
issuer or subsidiary is a business trust; or
(C) consultants or advisers who provide to the
issuer or subsidiary bona fide services unrelated to the offer or
sale of securities in a capital-raising transaction. (V.A.C.S.
Art. 581-5, Subsec. I (part).)
Sec. 4005.014. MORTGAGES AND LIENS. The exemption provided
by Section 4005.001 applies to a single transaction in which:
(1) the securities disposed of consist exclusively of
notes or bonds secured by a mortgage or vendor's lien on real
property or tangible personal property; and
(2) the entire mortgage or lien is sold or transferred
with all of the notes or bonds secured by the mortgage or lien.
(V.A.C.S. Art. 581-5, Subsec. J.)
Sec. 4005.015. NONPROFITS. The exemption provided by
Section 4005.001 applies to the disposition of a security or
membership:
(1) issued by a corporation or association:
(A) that is organized exclusively for a
religious, educational, benevolent, fraternal, charitable, or
reformatory purpose;
(B) that is not organized for pecuniary profit;
and
(C) for which no part of the net earnings inures
to the benefit of any stockholder, shareholder, or individual
member of the corporation or association; and
(2) for which no commission or remuneration is paid or
given or is to be paid or given. (V.A.C.S. Art. 581-5, Subsec. K.)
Sec. 4005.016. FINANCIAL INSTITUTIONS. The exemption
provided by Section 4005.001 applies to:
(1) the sale, by the issuer itself or by a registered
dealer, of any security issued or guaranteed by:
(A) a bank organized and subject to regulation
under the laws of:
(i) the United States; or
(ii) a state, territory, or insular
possession of the United States; or
(B) a savings and loan association organized and
subject to regulation under the laws of this state; or
(2) the sale, by the issuer itself, of any security
issued by a federal savings and loan association. (V.A.C.S. Art.
581-5, Subsec. L.)
Sec. 4005.017. GOVERNMENT ISSUANCE OR GUARANTEE. The
exemption provided by Section 4005.001 applies to the sale, by the
issuer itself or by a registered dealer, of any security either
issued or guaranteed by:
(1) the United States;
(2) the District of Columbia, a state, territory, or
insular possession of the United States;
(3) a political subdivision of a state of the United
States, including a county, city, municipal corporation, district,
and authority; or
(4) a public or governmental agency or instrumentality
of an entity described by Subdivisions (1)-(3). (V.A.C.S. Art.
581-5, Subsec. M.)
Sec. 4005.018. COOPERATIVES. (a) The exemption provided
by Section 4005.001 applies to:
(1) the sale and issuance of:
(A) any securities issued by a farmers'
cooperative marketing association organized under Chapter 52,
Agriculture Code, or the predecessor of that law (Article 5737 et
seq., Revised Statutes);
(B) any securities issued by a mutual loan
corporation organized under Chapter 54, Agriculture Code, or the
predecessor of that law (Article 2500 et seq., Revised Statutes);
or
(C) any equity securities issued by a cooperative
association organized under the Texas Cooperative Association Law
as described by Section 1.008(i), Business Organizations Code, or
the predecessor of that law (Article 1396-50.01, Vernon's Texas
Civil Statutes); or
(2) the sale of any securities issued by a farmers'
cooperative society organized under Chapter 51, Agriculture Code,
or the predecessor of that law (Article 2514 et seq., Revised
Statutes).
(b) The exemption provided by Section 4005.001 does not
apply to an agent of a farmers' cooperative marketing association,
mutual loan corporation, cooperative association, or farmers'
cooperative society if the sale of the securities is made to:
(1) nonmembers; or
(2) members and a commission is paid or contracted to
be paid to the agent. (V.A.C.S. Art. 581-5, Subsec. N.)
Sec. 4005.019. SECONDARY MARKET SALES. (a) In this
section, "recognized securities manual" means a nationally
distributed manual of securities that is approved by the board for
use under this section.
(b) The exemption provided by Section 4005.001 applies to
the sale of outstanding securities by a registered dealer if:
(1) the securities do not form part of an unsold
allotment to or subscription by the dealer as a participant in the
securities' distribution by the issuer of the securities;
(2) the securities are of the same class and the same
issuer and are outstanding in the hands of the public;
(3) the securities are offered for sale, in good
faith, at prices reasonably related to the current market price of
the securities at the time of the sale;
(4) none of the sale proceeds are paid directly or
indirectly to the issuer of the securities;
(5) the sale is not directly or indirectly for the
purposes of providing or furthering a scheme to violate or evade
this title;
(6) the right to sell or resell the securities has not
been enjoined by a court in this state by a proceeding instituted by
an officer or agency of this state charged with enforcement of this
title;
(7) the commissioner has not revoked or suspended the
right to sell the securities under this title or, if the
commissioner has revoked or suspended the right to sell the
securities, the revocation or suspension is not in effect;
(8) at the time of the sale, the issuer of the
securities is:
(A) a going concern actually engaged in business;
and
(B) not in an organization stage or in
receivership or bankruptcy; and
(9) either:
(A) the securities or other securities of the
issuer of the same class have been:
(i) qualified for sale by a permit issued
under Subchapter A, Chapter 4003;
(ii) registered by notification under
Subchapter B, Chapter 4003; or
(iii) registered by coordination under
Subchapter C, Chapter 4003; or
(B) a recognized securities manual or a
statement, in form and extent acceptable to the commissioner and
filed with the commissioner by the issuer or a registered dealer, is
provided at the time of the sale containing at least the following
information about the issuer:
(i) a statement of the issuer's principal
business;
(ii) a balance sheet as of a date not
earlier than 18 months before the date of the sale; and
(iii) profit and loss statements and a
record of any dividends paid for:
(a) a period of at least three years
before the date of the balance sheet; or
(b) the period of the issuer's
existence, if the issuer has been in existence less than three
years.
(c) The commissioner may issue a stop order or by order may
prohibit, revoke, or suspend the exemption under this section with
respect to any security if the commissioner has reasonable cause to
believe that the plan of business of the issuer of the security, the
security, or the sale of the security would tend to work a fraud or
deceit on any purchaser of the security. The order is subject to
review in the manner provided by Section 4007.107.
(d) Notice of any court injunction enjoining the sale or
resale of a security described by this section, or of an order
revoking or suspending the exemption under Subsection (c) with
respect to a security, shall be mailed by certified or registered
mail with return receipt requested or otherwise delivered to any
dealer believed to be selling or offering for sale the type of
securities referred to in the notice. Subsections (b)(6) and (7) do
not apply to a dealer until the dealer has received from the
commissioner actual notice of the revocation or suspension.
(e) The board, for cause shown, may revoke or suspend the
recognition under this section of any manual previously approved
under this section only after notice and an opportunity for a
hearing is provided as required by law.
(f) A judgment sustaining the board in the board action
complained about does not bar an application by the plaintiff for
approval of the manual as provided by this section after the first
anniversary of the date of the action.
(g) A judgment in favor of the plaintiff does not prevent
the board from revoking the recognition of a manual previously
approved under this section for any proper cause that may accrue or
be discovered. (V.A.C.S. Art. 581-5, Subsec. O.)
Sec. 4005.020. UNSOLICITED ORDERS. The exemption provided
by Section 4005.001 applies to a dealer's execution of an
unsolicited order for the purchase of securities for which the
initial offering of the securities has been completed if the
dealer:
(1) acts solely as an agent for the purchaser;
(2) does not have a direct or indirect interest in the
sale or distribution of securities ordered; and
(3) does not receive a commission, profit, or other
compensation from any source other than the purchaser. (V.A.C.S.
Art. 581-5, Subsec. P.)
Sec. 4005.021. OIL, GAS, OR MINING INTERESTS. (a) Subject
to Subsection (b), the exemption provided by Section 4005.001
applies to the sales of interests in and under oil, gas, or mining
leases, fees, or titles, or contracts relating to those interests
in which:
(1) the total number of sales by any one owner of
interests, whether whole, fractional, segregated, or undivided in
any single oil, gas, or mineral lease, fee, or title, or contract
relating to those interests, is not more than 35 during a 12
consecutive month period; and
(2) no use is made of advertisement or public
solicitation.
(b) If a sale of an interest described by Subsection (a) is
made for an owner of the interest by an agent of the owner, the
exemption under that subsection applies only if the agent is
registered under this title.
(c) An oil, gas, or mineral unitization or pooling agreement
may not be considered a sale under this title. (V.A.C.S. Art.
581-5, Subsec. Q.)
Sec. 4005.022. ISSUER SALES OF EXEMPT SECURITIES. (a) The
exemption provided by Section 4005.001 applies to the sale by the
issuer itself or by a subsidiary of the issuer of any securities
that would be exempt under Subchapter B if sold by a registered
dealer.
(b) This section does not apply to securities that would be
exempt under Section 4005.053. (V.A.C.S. Art. 581-5, Subsec. R.)
Sec. 4005.023. OPTIONS. (a) In this section, "option"
means and includes a put, call, straddle, or other option or
privilege of buying from another person or selling to another
person a specified number of securities at a specified price,
without being obligated to do so, on or before a specified date. The
term does not include an option or privilege that by its terms may
terminate before the specified date on the occurrence of a
specified event.
(b) The exemption provided by Section 4005.001 applies to a
sale of an option by or through a registered dealer if, at the time
of the sale:
(1) the performance of the terms of the option is
guaranteed by a broker-dealer registered under the Securities
Exchange Act of 1934 (15 U.S.C. Section 78a et seq.);
(2) the guaranty and broker-dealer described by
Subdivision (1) are in compliance with any requirements or rules
adopted or approved by the board;
(3) the option is not sold by or for the benefit of the
issuer of the security that may be purchased or sold on exercise of
the option;
(4) the security that may be purchased or sold on
exercise of the option is either:
(A) exempted under Section 4005.054; or
(B) quoted on the NASDAQ stock market and meets
the requirements of Sections 4005.019(b)(1), (6), (7), and (8); and
(5) the sale is not directly or indirectly for the
purposes of providing or furthering a scheme to violate or evade
this title. (V.A.C.S. Art. 581-5, Subsec. S.)
Sec. 4005.024. EXEMPTIONS BY RULE OR ORDER. The exemption
provided by Section 4005.001 applies to the sale of a security made
in other transactions or under other conditions not specified in
this subchapter as the board by rule or order may define or
prescribe, conditionally or unconditionally. (V.A.C.S. Art.
581-5, Subsec. T.)
Sec. 4005.025. ISSUANCE OR TRANSFER TO NONPROFITS. The
exemption provided by Section 4005.001 applies to the issuance or
transfer of securities by the issuer of its securities to a
corporation or association organized exclusively for a religious,
educational, benevolent, fraternal, charitable, or reformatory
purpose and not for pecuniary profit, only if:
(1) the corporation or association does not provide
anything of value for the securities other than, for a security that
is an option, payment of the exercise price of the option to acquire
the securities at a price not to exceed the fair market value of the
underlying securities on the date the option was granted;
(2) the issuance or transfer is not made for the
purpose of raising capital for the issuer;
(3) a commission or other form of consideration is not
paid or provided to a third party with respect to the issuance or
transfer; and
(4) the issuance or transfer is not directly or
indirectly for the purposes of providing or furthering a scheme to
violate or evade this title. (V.A.C.S. Art. 581-5, Subsec. U.)
SUBCHAPTER B. EXEMPT SECURITIES
Sec. 4005.051. SCOPE OF EXEMPTION. Except as expressly
provided otherwise in this title, this title does not apply to a
security described by this subchapter when offered for sale, sold,
or dealt in by a registered dealer or a registered dealer's agent.
(V.A.C.S. Art. 581-6 (part).)
Sec. 4005.052. RAILROADS OR UTILITIES. The exemption
provided by Section 4005.051 applies to:
(1) a security issued or guaranteed either as to
principal, interest, or dividend by a corporation that owns or
operates a railroad or any other public service utility if the
corporation is subject to regulation or supervision either as to
the corporation's rates and charges or as to the issuance of the
corporation's own securities by:
(A) the Texas Department of Transportation; or
(B) a public commission, an agency, a board, or
officers of:
(i) the government of the United States;
(ii) the District of Columbia, a state,
territory, or insular possession of the United States, or a
municipal corporation; or
(iii) Canada or a province of Canada; or
(2) equipment trust certificates or equipment notes or
bonds:
(A) that are based on chattel mortgages, leases
or agreements for conditional sale of cars, motive power or other
rolling stock mortgages, leased or sold to or provided for the use
of or on a railroad or other public service utility corporation if
the corporation is subject to regulation or supervision as
described by Subdivision (1); or
(B) for which the ownership or title of the
equipment is pledged or retained to secure the payment of the
equipment trust certificates, bonds, or notes, in accordance with
the laws of:
(i) the United States;
(ii) the District of Columbia or a state,
territory, or insular possession of the United States; or
(iii) Canada or a province of Canada.
(V.A.C.S. Art. 581-6, Subsec. D.)
Sec. 4005.053. NONPROFIT CORPORATIONS. The exemption
provided by Section 4005.051 applies to a security issued and sold
by a domestic corporation that:
(1) is not organized and engaged in business for
profit; and
(2) does not have capital stock. (V.A.C.S. Art. 581-6,
Subsec. E.)
Sec. 4005.054. LISTED SECURITIES. (a) The exemption
provided by Section 4005.051 applies to securities that at the time
of sale:
(1) are fully listed on:
(A) the American Stock Exchange;
(B) the Boston Stock Exchange;
(C) the Chicago Stock Exchange;
(D) the New York Stock Exchange; or
(E) a recognized and responsible stock exchange
approved by the commissioner, as provided by Subchapter C;
(2) are designated or approved for designation on
notice of issuance on the national market system of the NASDAQ stock
market; or
(3) are senior to, or if of the same issue, on a parity
with, any securities listed or designated as described by
Subdivision (1) or (2) or represented by subscription rights that
are listed or designated as described by Subdivision (1) or (2), or
evidence of indebtedness guaranteed by a company, any stock of
which is listed or designated as described by Subdivision (1) or
(2).
(b) Securities described by Subsection (a) are exempt only
so long as the exchange on which the securities are listed remains
approved under this section or Subchapter C. (V.A.C.S. Art. 581-6,
Subsec. F (part).)
Sec. 4005.055. COMMERCIAL PAPER. The exemption provided by
Section 4005.051 applies to:
(1) commercial paper that:
(A) arises out of a current transaction or the
proceeds of which have been or are to be used for current
transactions; and
(B) evidences an obligation to pay cash not later
than the ninth month after the issuance date of the commercial
paper, not including days of grace;
(2) a renewal of commercial paper described by
Subdivision (1) that is similarly limited; or
(3) a guarantee of commercial paper described by
Subdivision (1) or of a renewal described by Subdivision (2).
(V.A.C.S. Art. 581-6, Subsec. H.)
Sec. 4005.056. SECURED DEBT. The exemption provided by
Section 4005.051 applies to notes, bonds, or other evidence of
indebtedness or certificates of ownership that:
(1) are equally and proportionately secured without
reference of priority of one over another; and
(2) by the terms of the instrument creating the lien,
continue to be secured by the deposit with a trustee of recognized
responsibility approved by the commissioner of any of the
securities specified in:
(A) Section 4005.017, if the deposited
securities have an aggregate par value of not less than 110 percent
of the par value of the securities being secured; or
(B) Section 4005.052, if the deposited
securities have an aggregate par value of not less than 125 percent
of the par value of the securities being secured. (V.A.C.S. Art.
581-6, Subsec. I.)
Sec. 4005.057. NONPROFIT DEBT. The exemption provided by
Section 4005.051 applies to notes, bonds, or other evidence of
indebtedness of a religious, charitable, or benevolent
corporation. (V.A.C.S. Art. 581-6, Subsec. J.)
Sec. 4005.058. SUSPENSION OF EXEMPT STATUS OF TRADING
SYSTEM. (a) The commissioner, by the same procedures described by
Section 4005.105, may at any time suspend the exempt status of any
trading system exempted by the legislature on or after January 1,
1989, if at the time of the hearing the trading system does not meet
the applicable standards for approval of exchanges provided by this
title.
(b) The suspension of a trading system under Subsection (a)
has the same effect as the withdrawal of approval of a stock
exchange under Section 4005.105.
(c) The suspension under Subsection (a) remains in effect
until the commissioner by order determines that the trading system:
(1) has corrected each deficiency on which the
suspension was based; and
(2) maintains standards and procedures that provide
reasonable protection to the public. (V.A.C.S. Art. 581-6, Subsec.
F (part).)
SUBCHAPTER C. PROCEDURES FOR APPROVAL OF STOCK EXCHANGE
Sec. 4005.101. APPLICATION FOR APPROVAL. An organized
stock exchange may apply to the commissioner for approval in the
manner and on the forms the commissioner prescribes. (V.A.C.S. Art.
581-6, Subsec. F (part).)
Sec. 4005.102. APPROVAL OF STOCK EXCHANGE. The
commissioner may approve a stock exchange only if the commissioner
finds that the facts and data provided with the application
establish that:
(1) the requirements for the listing of securities on
the exchange seeking approval provide reasonable protection to the
public; and
(2) the governing constitution, bylaws, or
regulations of the exchange require:
(A) an adequate examination into the affairs of
the issuer of the securities to be listed on the exchange before
permitting trading on the exchange;
(B) that the issuer of the securities, while the
securities are listed on the exchange, shall periodically prepare,
make public, and provide promptly to the exchange appropriate
income, profit and loss, and other financial statements;
(C) that securities listed and traded on the
exchange be restricted to securities of ascertained, sound asset or
income value; and
(D) a reasonable surveillance of the exchange's
members, including a requirement for periodical financial
statements, a determination of the members' financial
responsibility, and the right and obligation of the exchange's
governing body to suspend or expel any member found:
(i) to be financially embarrassed or
irresponsible; or
(ii) guilty of misconduct in the member's
business dealings or of conduct prejudicial to the rights and
interests of the member's customers. (V.A.C.S. Art. 581-6, Subsec.
F (part).)
Sec. 4005.103. INVESTIGATION AND HEARING. The commissioner
may approve a stock exchange only after a reasonable investigation
and hearing. (V.A.C.S. Art. 581-6, Subsec. F (part).)
Sec. 4005.104. ORDER OF APPROVAL. The commissioner's
approval of a stock exchange must be made by a written order based
on a finding of fact substantially in accordance with the
requirements of Sections 4005.101 and 4005.102. (V.A.C.S. Art.
581-6, Subsec. F (part).)
Sec. 4005.105. WITHDRAWAL OF APPROVAL. At any time, the
commissioner, on 10 days' notice and hearing, may withdraw approval
of a stock exchange that at the time of the hearing does not meet the
standards for approval under this title. On the withdrawal of
approval, securities listed on the exchange are not exempt from
this title until the commissioner issues an order approving the
exchange. (V.A.C.S. Art. 581-6, Subsec. F (part).)
CHAPTER 4006. FEES
SUBCHAPTER A. CERTAIN REGISTRATION AND NOTICE FILING FEES
Sec. 4006.001. CERTAIN REGISTRATION AND NOTICE FILING
FEES
SUBCHAPTER B. EXEMPTION FEES AND OTHER FEES
Sec. 4006.051. NOTICE FOR SECONDARY TRADING EXEMPTION
Sec. 4006.052. NOTICE FOR LIMITED OFFERING EXEMPTION
Sec. 4006.053. APPLICATION FOR APPROVAL OF STOCK
EXCHANGE
Sec. 4006.054. AMENDMENT OR DUPLICATE OF REGISTRATION
CERTIFICATE OR EVIDENCE OF
REGISTRATION; REGISTRATION OF BRANCH
OFFICE
Sec. 4006.055. EXAMINATION OF CERTAIN APPLICATIONS OR
REGISTRATION STATEMENTS
Sec. 4006.056. CERTIFIED COPIES
Sec. 4006.057. REQUEST TO TAKE EXAMINATION
Sec. 4006.058. INTERPRETATION BY GENERAL COUNSEL
SUBCHAPTER C. PROVISIONS APPLICABLE TO CERTAIN FEES
Sec. 4006.101. REASONABLE AND NECESSARY REQUIREMENT
Sec. 4006.102. REDUCED FEES
Sec. 4006.103. PAYMENT OF CERTAIN COSTS
Sec. 4006.104. REFUND OF REGISTRATION FEE
SUBCHAPTER D. FEES FOR CERTAIN SALES OR OFFERS OF SECURITIES
Sec. 4006.151. FEE FOR SALE OF EXCESS SECURITIES
Sec. 4006.152. FEE FOR EXCEEDING LIMITED OFFERING
EXEMPTION
Sec. 4006.153. FEE FOR SALES OF UNREGISTERED
SECURITIES
SUBCHAPTER E. MISCELLANEOUS FEES
Sec. 4006.201. RENEWAL OF REGISTRATION BY NOTIFICATION
SUBCHAPTER F. DEPOSIT OF FEES
Sec. 4006.251. DEPOSIT OF FEES TO GENERAL REVENUE FUND
Sec. 4006.252. DAILY DEPOSIT OF CERTAIN FEES
CHAPTER 4006. FEES
SUBCHAPTER A. CERTAIN REGISTRATION AND NOTICE FILING FEES
Sec. 4006.001. CERTAIN REGISTRATION AND NOTICE FILING FEES.
The board shall establish the following fees in amounts so that the
aggregate amount that exceeds the amount of the fees on September 1,
2002, produces sufficient revenue to cover the costs of
administering and enforcing this title:
(1) for filing an original, amended, or renewal
application or registration statement to sell or dispose of
securities, an amount not to exceed $100;
(2) for filing an original application of a dealer or
investment adviser or submitting a notice filing for a federal
covered investment adviser, an amount not to exceed $100;
(3) for filing a renewal application of a dealer or
investment adviser or submitting a renewal notice filing for a
federal covered investment adviser, an amount not to exceed $100;
(4) for filing an original application for each agent,
officer, or investment adviser representative or submitting a
notice filing for each representative of a federal covered
investment adviser, an amount not to exceed $100; and
(5) for filing a renewal application for each agent,
officer, or investment adviser representative or submitting a
renewal notice filing for each representative of a federal covered
investment adviser, an amount not to exceed $100. (V.A.C.S. Art.
581-35, Subsec. A.)
SUBCHAPTER B. EXEMPTION FEES AND OTHER FEES
Sec. 4006.051. NOTICE FOR SECONDARY TRADING EXEMPTION. The
commissioner or board shall charge and collect:
(1) a fee of $500 for filing an initial notice required
by the commissioner to claim a secondary trading exemption; and
(2) a fee of $500 for filing a secondary trading
exemption renewal notice. (V.A.C.S. Art. 581-35, Subsec. B
(part).)
Sec. 4006.052. NOTICE FOR LIMITED OFFERING EXEMPTION. (a)
Subject to Subsection (b), for filing an initial notice required by
the commissioner to claim a limited offering exemption, the
commissioner or board shall charge and collect a fee of one-tenth of
one percent of the aggregate amount of securities described as
being offered for sale.
(b) A fee charged under this section may not exceed $500.
(V.A.C.S. Art. 581-35, Subsec. B (part).)
Sec. 4006.053. APPLICATION FOR APPROVAL OF STOCK EXCHANGE.
The commissioner or board shall charge and collect a fee of $10,000
for filing an application for approval of a stock exchange.
(V.A.C.S. Art. 581-35, Subsec. B (part).)
Sec. 4006.054. AMENDMENT OR DUPLICATE OF REGISTRATION
CERTIFICATE OR EVIDENCE OF REGISTRATION; REGISTRATION OF BRANCH
OFFICE. The commissioner or board shall charge and collect a fee of
$25 for a filing to:
(1) amend the registration certificate of a dealer or
investment adviser or the evidence of registration of an agent or
investment adviser representative;
(2) issue a duplicate certificate or evidence of
registration; or
(3) register a branch office. (V.A.C.S. Art. 581-35,
Subsec. B (part).)
Sec. 4006.055. EXAMINATION OF CERTAIN APPLICATIONS OR
REGISTRATION STATEMENTS. (a) For the examination of an original or
amended application or registration statement filed under
Subchapter A, B, or C, Chapter 4003, the commissioner or board shall
charge and collect a fee of one-tenth of one percent of the
aggregate amount of securities described and proposed to be sold to
persons located in this state based on the price at which the
securities will be offered to the public.
(b) A fee under this section applies regardless of whether
the application or registration statement is denied, abandoned,
withdrawn, or approved. (V.A.C.S. Art. 581-35, Subsec. B (part).)
Sec. 4006.056. CERTIFIED COPIES. (a) For a certified copy
of any papers filed in the office of the commissioner, the
commissioner shall charge and collect a fee that is reasonably
related to the costs of producing the certified copy.
(b) A fee charged under this section may not be more than a
fee that the secretary of state is authorized to charge for a
similar service. (V.A.C.S. Art. 581-35, Subsec. B (part).)
Sec. 4006.057. REQUEST TO TAKE EXAMINATION. The
commissioner or board shall charge and collect a fee of $35 for
filing a request to take the Texas Securities Law Examination.
(V.A.C.S. Art. 581-35, Subsec. B (part).)
Sec. 4006.058. INTERPRETATION BY GENERAL COUNSEL. (a)
Except as provided by Subsection (b), the commissioner or board
shall charge and collect a fee of $100 for an interpretation by the
board's general counsel of this title or a rule adopted under this
title.
(b) An officer or employee of a governmental entity and the
entity that the officer or employee represents are exempt from the
fee under this section if the officer or employee is conducting
official business of the entity. (V.A.C.S. Art. 581-35, Subsec. B
(part).)
SUBCHAPTER C. PROVISIONS APPLICABLE TO CERTAIN FEES
Sec. 4006.101. REASONABLE AND NECESSARY REQUIREMENT.
Subject to Subchapter A, the board shall set a fee under Subchapters
A and B in an amount that is reasonable and necessary to defray
costs. (V.A.C.S. Art. 581-35, Subsec. C.)
Sec. 4006.102. REDUCED FEES. (a) The board by rule may
adopt reduced fees under Section 4006.001 for original and renewal
applications of dealers, agents, officers, investment advisers, or
investment adviser representatives who have assumed inactive
status as defined by the board.
(b) The board by rule may adopt reduced fees under Section
4006.001 as appropriate to accommodate a small business required by
this title to register in two or more of the following capacities:
(1) dealer;
(2) agent;
(3) investment adviser;
(4) investment adviser representative; or
(5) officer.
(c) A person is not required to pay more than one fee
required under Section 4006.001 to engage in business in this state
concurrently for the same person or company as:
(1) a dealer and an investment adviser; or
(2) an agent and investment adviser representative.
(V.A.C.S. Art. 581-42.)
Sec. 4006.103. PAYMENT OF CERTAIN COSTS. A cost incurred by
the board in administering this title may be paid only from a fee
collected under Section 4006.001. (V.A.C.S. Art. 581-35,
Subsec. D.)
Sec. 4006.104. REFUND OF REGISTRATION FEE. If the
commissioner or board determines that all or part of a registration
fee should be refunded, the commissioner may make the refund by
warrant on the state treasury from money appropriated from the
general revenue fund for that purpose. (V.A.C.S. Art. 581-36
(part).)
SUBCHAPTER D. FEES FOR CERTAIN SALES OR OFFERS OF SECURITIES
Sec. 4006.151. FEE FOR SALE OF EXCESS SECURITIES. (a) An
offeror who sells securities in this state in excess of the
aggregate amount of securities registered for the offering may
apply to register the excess securities by paying:
(1) three times the difference between the initial fee
paid and the fee required under Section 4006.055 for the securities
sold to persons in this state;
(2) if the registration is no longer in effect,
interest on that amount computed at the rate provided by Section
302.002, Finance Code, from the date the registration was no longer
in effect until the date the subsequent application is filed; and
(3) the amendment fee prescribed by Section
4006.001(1).
(b) If an application to register excess securities is
granted under Subsection (a), the registration of the excess
securities is effective retroactively to the effective date of the
initial registration for the offering. (V.A.C.S. Art. 581-35-1,
Subsec. A.)
Sec. 4006.152. FEE FOR EXCEEDING LIMITED OFFERING
EXEMPTION. (a) This section applies only to an offeror who:
(1) has filed a notice to claim a limited offering
exemption;
(2) paid less than the maximum fee prescribed by
Section 4006.052; and
(3) offered a greater amount of securities in the
offering than authorized pursuant to the formula prescribed by
Section 4006.052.
(b) An offeror may:
(1) file an amended notice disclosing the amount of
securities offered; and
(2) pay:
(A) three times the difference between the fee
initially paid and the fee that should have been paid; and
(B) interest on that amount computed at the rate
provided by Section 302.002, Finance Code, from the date the
commissioner received the original notice until the date the
commissioner received the amended notice.
(c) An amended notice filed under Subsection (b) is
retroactive to the date of the initial filing of the notice to claim
the exemption. (V.A.C.S. Art. 581-35-1, Subsec. B.)
Sec. 4006.153. FEE FOR SALES OF UNREGISTERED SECURITIES.
(a) If, after notice and hearing, the commissioner or a court finds
that an offeror has sold securities in this state pursuant to an
offering no part of which has been registered under Chapter 4003 and
for which the transactions or securities are not exempt under
Chapter 4005, the commissioner or court may impose a fee equal to:
(1) six times the amount that would have been paid if
the issuer had filed an application or registration statement to
register the securities and paid the fee required under Section
4006.055 based on the aggregate amount of sales made in this state
in the preceding three years; and
(2) interest on that amount at the rate provided by
Section 302.002, Finance Code, from the date of the first such sale
made in this state until the date the fee is paid.
(b) Payment of the fee prescribed by this section does not
effect registration of the securities or affect the application of
any other provision of this title.
(c) Payment of the fee prescribed by this section is not an
admission that the transactions or securities were not exempt and
is not admissible as evidence in a suit or proceeding for failure to
register the securities. (V.A.C.S. Art. 581-35-2.)
SUBCHAPTER E. MISCELLANEOUS FEES
Sec. 4006.201. RENEWAL OF REGISTRATION BY NOTIFICATION. A
registration of securities by notification may be renewed as
provided by Section 4003.058, which includes the payment of the
renewal fee in the amount prescribed by that section. (New.)
SUBCHAPTER F. DEPOSIT OF FEES
Sec. 4006.251. DEPOSIT OF FEES TO GENERAL REVENUE FUND. The
commissioner or board shall deposit money received from fees under
this title to the credit of the general revenue fund. (V.A.C.S.
Art. 581-36 (part).)
Sec. 4006.252. DAILY DEPOSIT OF CERTAIN FEES. The
commissioner or board shall deposit daily all fees received under
Subchapter B to the credit of the general revenue fund. (V.A.C.S.
Art. 581-35, Subsec. B (part).)
CHAPTER 4007. ENFORCEMENT
SUBCHAPTER A. AUTHORITY TO ENFORCE TITLE
Sec. 4007.001. ENFORCEMENT BY COMMISSIONER, ATTORNEY
GENERAL, AND DISTRICT OR COUNTY
ATTORNEY
Sec. 4007.002. MEANS OF ENFORCEMENT NOT EXCLUSIVE
SUBCHAPTER B. INSPECTIONS AND INVESTIGATIONS
Sec. 4007.051. COMPLAINTS FILED WITH COMMISSIONER OR
BOARD
Sec. 4007.052. INSPECTIONS
Sec. 4007.053. INVESTIGATIVE AUTHORITY
Sec. 4007.054. SERVICE OF SUBPOENA, SUMMONS, OR OTHER
PROCESS
Sec. 4007.055. ENFORCEMENT OF SUBPOENA; CONTEMPT
Sec. 4007.056. CONFIDENTIALITY OF INVESTIGATIVE
INFORMATION
Sec. 4007.057. COMPENSATION OF WITNESSES
Sec. 4007.058. IMPOSITION OF COSTS ON PARTIES
Sec. 4007.059. ASSISTANCE TO SECURITIES REGULATORS IN
OTHER JURISDICTIONS
SUBCHAPTER C. ADMINISTRATIVE ACTIONS
Sec. 4007.101. CEASE AND DESIST ORDER: OFFER OR SALE
OF SECURITIES
Sec. 4007.102. CEASE AND DESIST ORDER: INVESTMENT
ADVISER OR INVESTMENT ADVISER
REPRESENTATIVE
Sec. 4007.103. CEASE PUBLICATION ORDER
Sec. 4007.104. EMERGENCY CEASE AND DESIST ORDER
Sec. 4007.105. DENIAL, SUSPENSION, OR REVOCATION OF
REGISTRATION
Sec. 4007.106. ASSESSMENT OF ADMINISTRATIVE FINE
Sec. 4007.107. HEARINGS ON CERTAIN MATTERS
SUBCHAPTER D. CIVIL PROCEEDINGS
Sec. 4007.151. RECEIVERSHIP
Sec. 4007.152. INJUNCTIVE RELIEF
Sec. 4007.153. EQUITABLE RELIEF AND RESTITUTION
Sec. 4007.154. CIVIL PENALTY
Sec. 4007.155. RECOVERY OF COSTS
SUBCHAPTER E. CRIMINAL PROVISIONS
Sec. 4007.201. UNAUTHORIZED SALE OF SECURITIES;
OFFENSE
Sec. 4007.202. UNAUTHORIZED RENDERING OF SERVICES AS
INVESTMENT ADVISER OR INVESTMENT
ADVISER REPRESENTATIVE; OFFENSE
Sec. 4007.203. FRAUDULENT CONDUCT; OFFENSE
Sec. 4007.204. MATERIALLY FALSE STATEMENT IN DOCUMENT
OR PROCEEDING; OFFENSE
Sec. 4007.205. FALSE STATEMENT OR REPRESENTATION
CONCERNING REGISTRATION; OFFENSE
Sec. 4007.206. VIOLATION OF CEASE AND DESIST ORDER;
OFFENSE
Sec. 4007.207. NONCOMPLIANT OFFER OR OFFER PROHIBITED
BY CEASE PUBLICATION ORDER; OFFENSE
Sec. 4007.208. AGGREGATION OF AMOUNTS
Sec. 4007.209. LIABILITY OF CORPORATION
CHAPTER 4007. ENFORCEMENT
SUBCHAPTER A. AUTHORITY TO ENFORCE TITLE
Sec. 4007.001. ENFORCEMENT BY COMMISSIONER, ATTORNEY
GENERAL, AND DISTRICT OR COUNTY ATTORNEY. (a) The administration
of the provisions of this title is vested in the commissioner.
(b) The commissioner and the attorney general shall:
(1) ensure that the provisions of this title are
obeyed; and
(2) conduct investigations and take measures to
prevent or detect a violation of this title.
(c) The commissioner shall at once submit any evidence of a
criminal violation of this title to the district or county attorney
of the appropriate county after the evidence comes to the
commissioner's knowledge.
(d) If the district or county attorney neglects or refuses
to prosecute the alleged criminal violation, the commissioner shall
submit the evidence of the alleged violation to the attorney
general. The attorney general may proceed with the criminal
prosecution of the alleged violation and has all the rights,
privileges, and powers conferred by law on a district or county
attorney, including the authority to appear before a grand jury and
to interrogate witnesses before a grand jury. (V.A.C.S. Art.
581-3.)
Sec. 4007.002. MEANS OF ENFORCEMENT NOT EXCLUSIVE. The
commissioner may use any or all penalties, sanctions, remedies, or
relief that the commissioner considers necessary. (V.A.C.S. Art.
581-3-1.)
SUBCHAPTER B. INSPECTIONS AND INVESTIGATIONS
Sec. 4007.051. COMPLAINTS FILED WITH COMMISSIONER OR BOARD.
(a) The commissioner or the commissioner's designee shall maintain
a file on each written complaint filed with the commissioner or
board concerning a person registered under this title. The file
must include:
(1) the name of the person who filed the complaint;
(2) the date the complaint was received by the
commissioner or board;
(3) the subject matter of the complaint;
(4) the name of each person contacted in relation to
the complaint;
(5) a summary of the results of the review or
investigation of the complaint; and
(6) an explanation of the reason the file was closed,
if the commissioner closed the file without taking action other
than the investigation of the complaint.
(b) The commissioner or the commissioner's designee shall
provide to the person filing the complaint and to each person who is
a subject of the complaint a copy of the board's policies and
procedures relating to complaint investigation and resolution.
(c) The commissioner or the commissioner's designee, at
least quarterly until final disposition of the complaint, shall
notify the person filing the complaint and each person who is a
subject of the complaint of the status of the investigation, unless
the notice would jeopardize an undercover investigation. (V.A.C.S.
Art. 581-2-6, Subsecs. A (part), B, C.)
Sec. 4007.052. INSPECTIONS. (a) The commissioner without
notice may inspect a registered dealer or registered investment
adviser as necessary to ensure compliance with this title and board
rules.
(b) The commissioner, during regular business hours, may
enter the business premises of a registered dealer or registered
investment adviser and examine and copy books and records pertinent
to the inspection.
(c) During the inspection, the registered dealer or
registered investment adviser shall:
(1) provide to the commissioner or the commissioner's
authorized representative immediate and complete access to the
registered dealer's or registered investment adviser's office,
place of business, files, safe, and any other location at which
books and records pertinent to the inspection are located; and
(2) allow the commissioner or the commissioner's
authorized representative to make photostatic or electronic copies
of books or records subject to inspection.
(d) A registered dealer or registered investment adviser
may not charge a fee for copying information under this section.
(e) Information obtained under this section and any
intra-agency or interagency notes, memoranda, reports, or other
communications consisting of advice, analyses, opinions, or
recommendations that are made in connection with the inspection are
confidential. The commissioner may not disclose to the public or
release documents or other information made confidential by this
subsection except to the same extent provided for the release or
disclosure of confidential documents or other information made or
obtained in connection with an investigation under Section
4007.053. (V.A.C.S. Art. 581-13-1.)
Sec. 4007.053. INVESTIGATIVE AUTHORITY. (a) The
commissioner shall conduct investigations as the commissioner
considers necessary to prevent or detect a violation of this title
or a board rule or order.
(b) For the purpose of conducting an investigation under
this section, the commissioner may:
(1) administer oaths;
(2) sign subpoenas;
(3) issue subpoenas or summons to compel the
attendance and testimony of witnesses and the production of all
records, electronic or otherwise, relating to any matter that the
commissioner has the authority under this title to consider or
investigate;
(4) examine witnesses; and
(5) receive evidence.
(c) During an investigation, the commissioner may cause the
deposition of witnesses residing inside or outside this state to be
taken in the manner prescribed by the laws of this state for taking
a deposition in a civil action. (V.A.C.S. Art. 581-28, Subsec. A
(part).)
Sec. 4007.054. SERVICE OF SUBPOENA, SUMMONS, OR OTHER
PROCESS. (a) The commissioner may serve a subpoena, summons, or
other process issued by the commissioner or have the subpoena,
summons, or other process served by an authorized agent of the
commissioner, a sheriff, or a constable.
(b) The sheriff's or constable's fee for serving the
subpoena is the same as the fee paid the sheriff or constable for
similar services. (V.A.C.S. Art. 581-28, Subsec. A (part).)
Sec. 4007.055. ENFORCEMENT OF SUBPOENA; CONTEMPT. (a) If a
person disobeys a subpoena or if a witness appearing before the
commissioner refuses to give evidence, the commissioner may
petition the district court of a jurisdiction in which the person or
witness may be found, and the court on this petition may issue an
order requiring the person or witness to, as applicable, obey the
subpoena, testify, or produce a book, an account, a record, a paper,
and correspondence relating to the matter in question.
(b) The district court may punish as contempt the failure to
obey an order under Subsection (a). (V.A.C.S. Art. 581-28, Subsec.
A (part).)
Sec. 4007.056. CONFIDENTIALITY OF INVESTIGATIVE
INFORMATION. (a) All information received in connection with an
investigation under Section 4007.053 and all internal notes,
memoranda, reports, or communications made in connection with an
investigation under that section are confidential.
(b) The commissioner may not disclose a document or other
information made confidential by Subsection (a) unless the
disclosure is made:
(1) to the public under court order for good cause
shown; or
(2) at the commissioner's discretion, as part of an
administrative proceeding or a civil or criminal action to enforce
this title.
(c) The commissioner, at the commissioner's discretion, may
disclose confidential information in the commissioner's possession
to:
(1) a governmental or regulatory authority or any
association of governmental or regulatory authorities approved by
board rule; or
(2) any receiver appointed under Section 4007.151.
(d) Disclosure of information under Subsection (c) does not
violate any other provision of this title or Chapter 552.
(e) This section may not be interpreted to prohibit or limit
the publication of rulings or decisions of the commissioner.
(V.A.C.S. Art. 581-28, Subsec. A (part).)
Sec. 4007.057. COMPENSATION OF WITNESSES. (a) A witness
required to attend a hearing before the commissioner shall receive
for each day's attendance a fee in an amount set by board rule.
(b) A disbursement made in payment of a fee under this
section shall be:
(1) made in accordance with board rule; and
(2) included in, and paid in the same manner that is
provided for, the payment of other expenses incurred in the
administration and enforcement of this title. (V.A.C.S. Art.
581-28, Subsec. A (part).)
Sec. 4007.058. IMPOSITION OF COSTS ON PARTIES. The
commissioner may impose on a party of record fees, expenses, or
costs incurred in connection with a hearing or may divide the fee,
expense, or cost among any or all parties of record as determined by
the commissioner. (V.A.C.S. Art. 581-28, Subsec. A (part).)
Sec. 4007.059. ASSISTANCE TO SECURITIES REGULATORS IN OTHER
JURISDICTIONS. (a) On request from a securities regulator of
another state or of a foreign jurisdiction, the commissioner may
provide assistance to the regulator in conducting an investigation
to determine whether a person has violated, is violating, or is
about to violate a law or rule of the other state or foreign
jurisdiction relating to a securities matter that the regulator is
authorized to administer or enforce.
(b) The commissioner may provide assistance under this
section through the use of the authority to investigate and any
other power conferred by this section or Section 4007.054,
4007.055, 4007.056, or 4007.057, as the commissioner determines to
be necessary and appropriate.
(c) In determining whether to provide assistance under this
section, the commissioner may consider whether:
(1) the securities regulator is permitted and has
agreed to provide assistance within the regulator's jurisdiction to
the commissioner reciprocally and at the commissioner's request
concerning securities matters;
(2) compliance with the request for assistance would
violate or otherwise prejudice the public policy of this state;
(3) the conduct described in the request would also
constitute a violation of this title or another law of this state
had the conduct occurred in this state; and
(4) board employees and board or commissioner
resources necessary to carry out the request for assistance are
available. (V.A.C.S. Art. 581-28, Subsec. C.)
SUBCHAPTER C. ADMINISTRATIVE ACTIONS
Sec. 4007.101. CEASE AND DESIST ORDER: OFFER OR SALE OF
SECURITIES. (a) The commissioner may hold a hearing as provided by
this section if at any time it appears to the commissioner that the
sale, proposed sale, or method of sale of securities, regardless of
whether exempt:
(1) is a fraudulent practice;
(2) does not comply with this title;
(3) would tend to work a fraud on any purchaser of the
securities; or
(4) would not be fair, just, or equitable to any
purchaser of the securities.
(b) The commissioner may hold a hearing under this section
on a date set by the commissioner that is not later than the 30th day
after the date the issuer or registrant of the securities, the
person on whose behalf the securities are being or will be offered,
or any person that is acting as a dealer or agent in violation of
this title, as applicable:
(1) receives actual notice; or
(2) is provided notice by registered or certified mail
to the person's last known address.
(c) If the commissioner determines at the hearing that the
sale, proposed sale, or method of sale of the securities is a
fraudulent practice, does not comply with this title, would tend to
work a fraud on any purchaser of the securities, or would not be
fair, just, or equitable to any purchaser of the securities, the
commissioner may issue a written cease and desist order:
(1) prohibiting or suspending the sale of the
securities;
(2) denying or revoking the registration of the
securities;
(3) prohibiting an unregistered person from acting as
a dealer or agent; or
(4) prohibiting the fraudulent conduct.
(d) After the issuance of a cease and desist order under
Subsection (c), a dealer or agent may not knowingly sell or offer
for sale any security named in the order. (V.A.C.S. Art. 581-23,
Subsec. A.)
Sec. 4007.102. CEASE AND DESIST ORDER: INVESTMENT ADVISER
OR INVESTMENT ADVISER REPRESENTATIVE. (a) Notwithstanding any
provision of this title to the contrary, the commissioner may hold a
hearing as provided by this section if at any time it appears to the
commissioner that:
(1) an investment adviser or investment adviser
representative is engaging or is likely to engage in fraud or a
fraudulent practice with respect to rendering services as an
investment adviser or investment adviser representative; or
(2) a person is acting as an investment adviser or
investment adviser representative in violation of this title.
(b) A hearing under this section must be held not later than
the 30th day after the date the person described by Subsection (a):
(1) receives actual notice; or
(2) is provided notice by registered or certified
mail, return receipt requested, to the person's last known address.
(c) After the hearing, the commissioner shall issue or
decline to issue a cease and desist order. An order issued under
this subsection must:
(1) require the investment adviser or investment
adviser representative to immediately cease and desist from the
fraudulent conduct; or
(2) prohibit an unregistered or other unauthorized
person who is not exempt from the registration or notice filing
requirements of this title from acting as an investment adviser or
investment adviser representative in violation of this title.
(V.A.C.S. Art. 581-23, Subsec. B.)
Sec. 4007.103. CEASE PUBLICATION ORDER. (a)
Notwithstanding any provision of this title to the contrary, the
commissioner may issue a cease publication order if at any time it
appears to the commissioner that an offer contains any statement
that is materially false or misleading or is otherwise likely to
deceive the public.
(b) A person may not make an offer that is prohibited by an
order issued under Subsection (a). (V.A.C.S. Art. 581-23, Subsec.
C.)
Sec. 4007.104. EMERGENCY CEASE AND DESIST ORDER. (a) On the
commissioner's determination that the conduct, act, or practice
threatens immediate and irreparable public harm, the commissioner
may issue an emergency cease and desist order to a person who the
commissioner reasonably believes:
(1) is engaging in or is about to engage in fraud or a
fraudulent practice in connection with:
(A) the offer for sale or sale of a security; or
(B) the rendering of services as an investment
adviser or investment adviser representative;
(2) has made an offer containing a statement that is
materially misleading or is otherwise likely to deceive the public;
or
(3) is engaging or is about to engage in an act or
practice that violates this title or a board rule.
(b) The emergency order must:
(1) be sent on issuance to each person affected by the
order by personal delivery or registered or certified mail, return
receipt requested, to the person's last known address;
(2) state the specific charges and require the person
to immediately cease and desist from the unauthorized activity; and
(3) contain a notice that a request for a hearing may
be filed under this section.
(c) Unless a person against whom the emergency order is
directed requests a hearing in writing before the 31st day after the
date the order is served on the person, the emergency order is final
and nonappealable as to that person. A request for a hearing must:
(1) be in writing and directed to the commissioner;
and
(2) state the grounds for the request to set aside or
modify the order.
(d) On receiving a request for a hearing, the commissioner
shall serve notice of the time and place of the hearing by personal
delivery or registered or certified mail, return receipt requested.
The hearing must be held not later than the 10th day after the date
the commissioner receives the request for a hearing unless the
parties agree to a later hearing date. At the hearing, the
commissioner has the burden of proof and must present evidence in
support of the emergency order.
(e) After the hearing, the commissioner shall affirm,
modify, or set aside, wholly or partly, the emergency order. An
order affirming or modifying the emergency order is immediately
final for purposes of enforcement and appeal.
(f) An emergency order continues in effect unless the order
is stayed by the commissioner. The commissioner may impose any
condition before granting a stay of the order. (V.A.C.S. Art.
581-23-2.)
Sec. 4007.105. DENIAL, SUSPENSION, OR REVOCATION OF
REGISTRATION. (a) The commissioner may deny an application for
registration under this title, suspend or revoke a registration
issued under this title, place on probation a dealer, agent,
investment adviser, or investment adviser representative whose
registration has been suspended under this title, or reprimand a
person registered under this title if the person:
(1) has been convicted of a felony;
(2) has been convicted of a misdemeanor that directly
relates to the person's securities-related duties and
responsibilities;
(3) has engaged in:
(A) an inequitable practice in the sale of
securities or in rendering services as an investment adviser; or
(B) a fraudulent business practice;
(4) is an insolvent dealer or investment adviser;
(5) is a dealer and is selling or sold securities in
this state through an agent other than a registered agent;
(6) is an investment adviser and is engaging or
engaged in rendering services as an investment adviser in this
state through a representative who is not registered to perform
services for that investment adviser;
(7) is an agent and is selling or sold securities in
this state for a dealer, issuer, or controlling person with
knowledge that the dealer, issuer, or controlling person has not
complied with this title;
(8) is an investment adviser representative and is
rendering or rendered services as an investment adviser for an
investment adviser in this state whom the representative is not or
was not registered to represent;
(9) has:
(A) made a material misrepresentation to the
commissioner or board in connection with information considered
necessary by the commissioner or board to determine:
(i) a dealer's or investment adviser's
financial responsibility; or
(ii) a dealer's, agent's, investment
adviser's, or investment adviser representative's business repute
or qualifications; or
(B) refused to provide information described by
Paragraph (A) that the commissioner or board has requested;
(10) is registered as a dealer, agent, investment
adviser, or investment adviser representative and has not complied
with an applicable requirement under Section 4004.151(a);
(11) is the subject of any of the following orders
issued within the preceding five years that remain effective:
(A) an order by the securities agency or
administrator of any state, the financial regulatory authority of a
foreign country, or the Securities and Exchange Commission, entered
after notice and opportunity for hearing, denying, suspending, or
revoking the person's license as a dealer, agent, investment
adviser, or investment adviser representative or the substantial
equivalent of those terms;
(B) an order suspending or expelling from
membership in or association with a member of a self-regulatory
organization;
(C) a United States Postal Service fraud order;
(D) an order by the securities agency or
administrator of any state, the financial regulatory authority of a
foreign country, the Securities and Exchange Commission, or the
Commodity Futures Trading Commission, finding, after notice and
opportunity for hearing, that the person engaged in acts involving
fraud, deceit, false statements or omissions, or wrongful taking of
property; or
(E) an order by the Commodity Futures Trading
Commission denying, suspending, or revoking registration under the
Commodity Exchange Act (7 U.S.C. Section 1 et seq.);
(12) is subject to any order, judgment, or decree
entered by a court that permanently restrains or enjoins the person
from engaging in or continuing any conduct, action, or practice in
connection with any aspect of the purchase or sale of securities or
the rendering of investment advice; or
(13) has violated:
(A) any provision of this title;
(B) a board rule;
(C) any order issued by the commissioner; or
(D) any undertaking or agreement with the
commissioner.
(b) If the commissioner proposes the suspension or
revocation of a person's registration, the person is entitled to a
hearing before the commissioner or a hearings officer as required
by law.
(c) All registration certificates that have been revoked
shall be immediately surrendered to the commissioner on request.
(d) This section does not affect the confidentiality of
investigative records maintained by the commissioner or board.
(V.A.C.S. Arts. 581-14, 581-25 (part).)
Sec. 4007.106. ASSESSMENT OF ADMINISTRATIVE FINE. (a) In
addition to any other remedies, the commissioner, after giving
notice and opportunity for a hearing, may issue an order that
assesses an administrative fine against a person or company found
to have:
(1) engaged in fraud or a fraudulent practice in
connection with:
(A) the offer for sale or sale of a security; or
(B) the rendering of services as an investment
adviser or investment adviser representative;
(2) made an offer containing a statement that is
materially misleading or is otherwise likely to deceive the public;
(3) engaged in an act or practice that violates this
title or a board rule or order; or
(4) with intent to deceive or defraud or with reckless
disregard for the truth or the law, materially aided any person in
engaging in an act or practice described by Subdivision (1), (2), or
(3).
(b) An administrative fine assessed under this section when
added to the amount of any civil penalty previously awarded under
Section 4007.154 must be in an amount that does not exceed:
(1) the greater of:
(A) $20,000 per violation; or
(B) the gross amount of any economic benefit
gained by the person or company as a result of the act or practice
for which the fine was assessed; and
(2) if the act or practice was committed against a
person 65 years of age or older, an additional amount of not more
than $250,000.
(c) For purposes of determining the amount of an
administrative fine assessed under this section, the commissioner
shall consider factors set out in guidelines established by the
board.
(d) For purposes of private civil litigation, the payment of
a fine assessed in an agreed order under this title does not
constitute an admission of any misconduct described in the order.
(e) A proceeding for the assessment of an administrative
fine must be commenced within five years after the violation
occurs. (V.A.C.S. Art. 581-23-1.)
Sec. 4007.107. HEARINGS ON CERTAIN MATTERS. (a) A person
or company may request a hearing to dispute the commissioner's:
(1) failure or refusal to:
(A) register and issue a certificate of
registration for a dealer or investment adviser under Section
4004.054; or
(B) register and issue evidence of registration
for an agent or investment adviser representative under Section
4004.104;
(2) issuance of an order under Section 4007.101,
4007.102, 4007.103, or 4007.104; or
(3) taking of an action in any other particular matter
for which no other procedure is specified by this title.
(b) A hearing under Subsection (a) must be held before the
commissioner or a hearings officer as required by law.
(c) On complaint by a person aggrieved by the denial of a
permit qualifying securities for sale under Subchapter A, Chapter
4003, or by the failure or refusal to register securities under
Subchapter B or C, Chapter 4003, the board or a hearings officer, as
required by law, shall conduct a hearing.
(d) A hearing under this section is subject to Chapter 2001.
(V.A.C.S. Art. 581-24.)
SUBCHAPTER D. CIVIL PROCEEDINGS
Sec. 4007.151. RECEIVERSHIP. (a) This section applies
only to a person or company acting as a dealer, agent, investment
adviser, investment adviser representative, or issuer or as an
affiliate of a dealer, agent, investment adviser, investment
adviser representative, or issuer, regardless of whether the person
or company is required to be registered as provided in this title.
(b) The commissioner may request the attorney general to
bring an action as provided by this section for the appointment of a
receiver for a person or company to which this section applies or
the assets of the person or company if it appears to the
commissioner, on complaint or otherwise, that:
(1) the person or company has:
(A) engaged in an act, transaction, practice, or
course of business declared as a fraudulent practice under Section
4007.152 or 4007.153; and
(B) acted as a dealer, agent, investment adviser,
investment adviser representative, or issuer or as an affiliate of
a dealer, agent, investment adviser, investment adviser
representative, or issuer in connection with the fraudulent
practice; and
(2) the appointment of a receiver for the person or
company or the assets of the person or company is necessary to
conserve and protect the assets for the benefit of customers,
security holders, and other claimants and potential claimants of
the person or company.
(c) On the commissioner's request under Subsection (b), the
attorney general may bring an action against a person or company in
the name and on behalf of the state if it appears to the attorney
general that the facts described by that subsection exist with
respect to the person or company. The facts contained in the
petition for the appointment of a receiver must be verified by the
commissioner on information and belief.
(d) An action under this section may be brought in a
district court of any county in which the fraudulent practice that
is the subject of the petition was wholly or partly committed or in
a county in which any defendant for whom the appointment of a
receiver is sought has the defendant's principal place of business.
A district court described by this subsection has jurisdiction and
venue of the action. This subsection is superior to any other
provision of law establishing jurisdiction or venue with regard to
an action for receivership.
(e) The attorney general may apply for and, on proper
showing, is entitled to have a subpoena issued by the court that
requires:
(1) the appearance, without delay, of a defendant or
any employee, investment adviser representative, or agent of the
defendant to testify and give evidence concerning a matter relevant
to the appointment of a receiver; and
(2) the production of documents, books, and records
that may be necessary for a hearing on the action.
(f) The court may appoint a receiver for the person or
company or the person's or company's assets on the attorney
general's proper showing of the existence of the facts described by
Subsection (b) with respect to the person or company.
(g) If the court appoints a receiver without providing the
person or company with notice and an opportunity for hearing, the
person or company may file with the court a written application for
an order dissolving the receivership. If the application is filed
not later than the 30th day after the date the person or company is
served with the order appointing the receiver, the person or
company is entitled to a hearing on the application not later than
the 10th day after the date written notice is provided to the
attorney general.
(h) A person may not be appointed as a receiver under this
section unless the court finds that the person is qualified to
discharge the duties of receiver after:
(1) hearing the views of:
(A) the attorney general;
(B) the commissioner; and
(C) the defendant against whom the appointment of
a receiver is sought, if the court considers it practicable; and
(2) considering the probable nature and magnitude of
the receiver's duties in the particular case.
(i) The commissioner or attorney general may not be required
to give a bond for receivership in an action brought under this
section. The court shall require a person appointed as a receiver
to give a bond that is:
(1) in an amount found by the court to be sufficient
after considering the probable nature and magnitude of the
receiver's duties in the particular case; and
(2) conditioned on the faithful discharge of the
receiver's duties.
(j) The remedy provided by this section is in addition to
any other remedy made available to the commissioner or the attorney
general by statutory laws or case law of this state, including any
provision authorizing receiverships. (V.A.C.S. Art. 581-25-1.)
Sec. 4007.152. INJUNCTIVE RELIEF. (a) The commissioner
may request the attorney general to bring an action as provided by
this section against a person or company if it appears to the
commissioner, on complaint or otherwise, that the person or
company:
(1) has engaged, is engaging, or is about to engage in
fraud or a fraudulent practice in connection with the sale of a
security;
(2) has engaged, is engaging, or is about to engage in
fraud or a fraudulent practice in rendering services as an
investment adviser or investment adviser representative;
(3) has made an offer containing a statement that is
materially misleading or is otherwise likely to deceive the public;
or
(4) has engaged, is engaging, or is about to engage in
an act or practice that violates this title or a board rule or
order.
(b) On the commissioner's request under Subsection (a), the
attorney general, in addition to other remedies, may bring an
action in the name and on behalf of the state:
(1) against:
(A) a person or company described by Subsection
(a);
(B) any person who, with intent to deceive or
defraud or with reckless disregard for the truth or the law, has
materially aided, is materially aiding, or is about to materially
aid the person or company; and
(C) any other person concerned with or in any
manner participating in or about to participate in the acts or
practices described by Subsection (a); and
(2) to enjoin the person or company and any other
person described by Subdivision (1) from continuing the acts or
practices that are the subject of the action for injunctive relief
or from doing any act to further the acts or practices.
(c) The facts contained in an application for injunctive
relief must be verified by the commissioner on information and
belief.
(d) The attorney general may apply for and, on proper
showing, is entitled to have a subpoena issued by the court that
requires:
(1) the appearance, without delay, of a defendant and
any employee or agent of the defendant to testify and give evidence
concerning the acts, conduct, or other matters complained about in
the application for injunctive relief; and
(2) the production of documents, books, and records
that may be necessary for the hearing on the action.
(e) A district court in any county in which it is shown that
the acts that are the subject of the application for injunctive
relief have been or are about to be committed or a district court in
Travis County has jurisdiction and venue of an action brought under
this section. This subsection is superior to any provision
establishing jurisdiction or venue with regard to an action for an
injunction.
(f) The commissioner or attorney general shall not be
required to give a bond for injunction in an action brought under
this section. (V.A.C.S. Art. 581-32, Subsec. A.)
Sec. 4007.153. EQUITABLE RELIEF AND RESTITUTION. (a) On
the commissioner's request, the attorney general may, in addition
to other remedies, seek:
(1) equitable relief, including restitution, for a
victim of a fraudulent practice; and
(2) the disgorgement of any economic benefit gained by
a defendant through an act or practice that violates this title or
for which this title provides the commissioner and attorney general
with a remedy.
(b) The attorney general may seek the remedies described by
Subsection (a) either in:
(1) an action under Section 4007.152; or
(2) a separate action brought in district court.
(c) The court may:
(1) grant any equitable relief the court considers
appropriate; and
(2) order the defendant to deliver to each victim of an
act or practice that violates this title, or for which this title
provides the commissioner or the attorney general with a remedy,
the amount of money or the property the defendant obtained from the
victim, including any bonus, fee, commission, option, proceeds, or
profit from or loss avoided through the sale of the security or
through the rendering of services as an investment adviser or
investment adviser representative, or any other tangible benefit.
(V.A.C.S. Art. 581-32, Subsec. B.)
Sec. 4007.154. CIVIL PENALTY. (a) On the commissioner's
request, the attorney general may, in addition to other remedies,
seek a civil penalty to be paid to the state in an amount that, when
added to the amount of any administrative fine previously assessed
under Section 4007.106(b), does not exceed:
(1) the greater of:
(A) $20,000 per violation; or
(B) the gross amount of any economic benefit
gained by the person or company as a result of the commission of the
act or practice; and
(2) if the act or practice was committed against a
person 65 years of age or older, an additional amount of not more
than $250,000.
(b) The attorney general may seek a civil penalty under this
section either in:
(1) an action under Section 4007.152; or
(2) a separate action in district court. (V.A.C.S.
Art. 581-32, Subsec. C.)
Sec. 4007.155. RECOVERY OF COSTS. In an action brought
under Section 4007.152, 4007.153, or 4007.154, the attorney general
may recover reasonable costs and expenses incurred by the attorney
general in bringing the action. (V.A.C.S. Art. 581-32, Subsec. D.)
SUBCHAPTER E. CRIMINAL PROVISIONS
Sec. 4007.201. UNAUTHORIZED SALE OF SECURITIES; OFFENSE.
(a) A person commits an offense if the person sells, offers for
sale or delivery, solicits subscriptions to or orders for, disposes
of, invites orders for, or deals in any other manner in a security
issued after September 6, 1955, unless:
(1) the security has been registered under Subchapter
B or C, Chapter 4003; or
(2) a permit qualifying securities for sale has been
issued under Subchapter A, Chapter 4003, with respect to the
security.
(b) A person commits an offense if the person sells, offers
for sale or delivery, solicits subscriptions to or orders for,
disposes of, invites offers for, or deals in any other manner in a
security without being a registered dealer or registered agent as
provided in this title.
(c) An offense under this section is a felony of the third
degree. (V.A.C.S. Art. 581-29 (part).)
Sec. 4007.202. UNAUTHORIZED RENDERING OF SERVICES AS
INVESTMENT ADVISER OR INVESTMENT ADVISER REPRESENTATIVE; OFFENSE.
(a) A person commits an offense if the person:
(1) renders services as an investment adviser or
investment adviser representative; and
(2) is not registered as an investment adviser or
investment adviser representative as required by this title.
(b) An offense under this section is a felony of the third
degree. (V.A.C.S. Art. 581-29 (part).)
Sec. 4007.203. FRAUDULENT CONDUCT; OFFENSE. (a) A person
commits an offense if:
(1) the person directly or indirectly:
(A) engages in any fraud or fraudulent practice;
(B) employs any device, scheme, or artifice to
defraud;
(C) knowingly makes an untrue statement of a
material fact or omits to state a material fact necessary in order
to make the statements made, in light of the circumstances under
which they are made, not misleading; or
(D) engages in any act, practice, or course of
business that operates or will operate as a fraud or deceit on any
person; and
(2) the applicable conduct is committed in connection
with:
(A) the sale of, the offering for sale or
delivery of, the purchase of, the offer to purchase, invitation of
offers to purchase, invitations of offers to sell, or dealing in any
other manner in any security, regardless of whether the transaction
or security is exempt under Chapter 4005; or
(B) the rendering of services as an investment
adviser or an investment adviser representative.
(b) An offense under this section is:
(1) a felony of the third degree, if the amount
involved in the offense is less than $10,000;
(2) a felony of the second degree, if the amount
involved in the offense is $10,000 or more but less than $100,000;
or
(3) a felony of the first degree, if the amount
involved is $100,000 or more.
(c) An indictment for an offense under this section may be
brought only before the fifth anniversary of the date the offense
was committed. (V.A.C.S. Art. 581-29 (part); Art. 581-29-1.)
Sec. 4007.204. MATERIALLY FALSE STATEMENT IN DOCUMENT OR
PROCEEDING; OFFENSE. (a) A person commits an offense if the person
knowingly makes or causes to be made any statement in a document
filed with the commissioner or in a proceeding under this title that
is, at the time and in light of the circumstances under which the
statement is made, false or misleading in any material respect.
(b) An offense is established under this section regardless
of whether the document or proceeding relates to a transaction or
security that is exempt under Chapter 4005.
(c) An offense under this section is a felony of the third
degree. (V.A.C.S. Art. 581-29 (part).)
Sec. 4007.205. FALSE STATEMENT OR REPRESENTATION
CONCERNING REGISTRATION; OFFENSE. (a) A person commits an offense
if the person knowingly makes a false statement or representation
concerning a registration made or an exemption claimed under this
title.
(b) An offense under this section is a state jail felony.
(V.A.C.S. Art. 581-29 (part).)
Sec. 4007.206. VIOLATION OF CEASE AND DESIST ORDER;
OFFENSE. (a) A person commits an offense if the person knowingly
violates a cease and desist order issued by the commissioner under
Section 4007.101, 4007.102, or 4007.104.
(b) An offense under this section is a felony of the third
degree. (V.A.C.S. Art. 581-29 (part).)
Sec. 4007.207. NONCOMPLIANT OFFER OR OFFER PROHIBITED BY
CEASE PUBLICATION ORDER; OFFENSE. (a) A person commits an offense
if the person:
(1) makes an offer of a security in this state that
does not comply with the requirements governing offers specified in
Subchapter E, Chapter 4003; or
(2) knowingly makes an offer of a security in this
state that is prohibited by a cease publication order issued by the
commissioner under Section 4007.103.
(b) An offense under this section is a state jail felony.
(V.A.C.S. Art. 581-29 (part).)
Sec. 4007.208. AGGREGATION OF AMOUNTS. When amounts are
obtained in violation of this title pursuant to one scheme or
continuing course of conduct, whether from the same or several
sources, the conduct may be considered as one offense and the
amounts aggregated in determining the grade of the offense.
(V.A.C.S. Art. 581-29-2.)
Sec. 4007.209. LIABILITY OF CORPORATION. (a) In this
section:
(1) "Association" and "corporation" have the meanings
assigned by Section 1.07, Penal Code.
(2) "High managerial agent" has the meaning assigned
by Section 7.21, Penal Code.
(b) If conduct constituting an offense under this
subchapter is performed by an agent acting on behalf of a
corporation or association and within the scope of the agent's
office or employment, the corporation or association is criminally
responsible for the offense only if the commission of the offense
was authorized, requested, commanded, performed, or recklessly
tolerated by:
(1) a majority of the governing board acting on behalf
of the corporation or association; or
(2) a high managerial agent acting on behalf of the
corporation or association and within the scope of the high
managerial agent's office or employment.
(c) It is an affirmative defense to prosecution of a
corporation or association under Subsection (b) that the high
managerial agent having supervisory responsibility over the
subject matter of the offense employed due diligence to prevent the
commission of the offense. (V.A.C.S. Art. 581-29-3.)
CHAPTER 4008. PRIVATE RIGHTS OF ACTION
SUBCHAPTER A. GENERAL PROVISIONS
Sec. 4008.001. UNENFORCEABILITY OF ILLEGAL CONTRACTS
Sec. 4008.002. CERTAIN WAIVERS VOID
Sec. 4008.003. ACTION FOR COLLECTION OF COMMISSION OR
COMPENSATION
Sec. 4008.004. STAY OF RECOGNITION OR ENFORCEMENT OF
FOREIGN-COUNTRY JUDGMENT
Sec. 4008.005. SURVIVABILITY OF ACTION
Sec. 4008.006. SAVING OF EXISTING RIGHTS AND REMEDIES
SUBCHAPTER B. CIVIL LIABILITY FOR ISSUANCE, SALE, OR PURCHASE OF
SECURITIES
Sec. 4008.051. OFFEROR OR SELLER LIABILITY: REGISTRATION AND
RELATED VIOLATIONS
Sec. 4008.052. OFFEROR OR SELLER LIABILITY: UNTRUTH OR OMISSION
Sec. 4008.053. BUYER LIABILITY
Sec. 4008.054. NONSELLING ISSUER LIABILITY
Sec. 4008.055. CONTROLLING PERSON OR AIDER LIABILITY
Sec. 4008.056. RESCISSION
Sec. 4008.057. DAMAGES
Sec. 4008.058. REQUIREMENTS OF RESCISSION OFFER TO
BUYERS
Sec. 4008.059. REQUIREMENTS OF RESCISSION OFFER TO
SELLERS
Sec. 4008.060. COSTS; ATTORNEY'S FEES
Sec. 4008.061. LIMITATION OF LIABILITY IN SMALL
BUSINESS ISSUANCES
Sec. 4008.062. STATUTE OF LIMITATIONS
SUBCHAPTER C. CIVIL LIABILITY OF INVESTMENT ADVISERS AND
INVESTMENT ADVISER REPRESENTATIVES
Sec. 4008.101. INVESTMENT ADVISER OR INVESTMENT
ADVISER REPRESENTATIVE LIABILITY
Sec. 4008.102. CONTROLLING PERSON OR AIDER LIABILITY
Sec. 4008.103. DAMAGES
Sec. 4008.104. STATUTE OF LIMITATIONS
Sec. 4008.105. REMEDY NOT EXCLUSIVE
CHAPTER 4008. PRIVATE RIGHTS OF ACTION
SUBCHAPTER A. GENERAL PROVISIONS
Sec. 4008.001. UNENFORCEABILITY OF ILLEGAL CONTRACTS. A
person may not base a suit on a contract if the person:
(1) made or engaged in the performance of the contract
in violation of this title or a rule, order, or requirement under
this title; or
(2) acquired any purported right under the contract
with knowledge of the facts by reason of which the contract's making
or performance was in violation of this title or a rule, order, or
requirement under this title. (V.A.C.S. Art. 581-33, Subsec. K.)
Sec. 4008.002. CERTAIN WAIVERS VOID. A condition,
stipulation, or provision is void if it binds a buyer or seller of a
security or a purchaser of services rendered by an investment
adviser or investment adviser representative to waive compliance
with this title or a rule, order, or requirement under this title.
(V.A.C.S. Art. 581-33, Subsec. L.)
Sec. 4008.003. ACTION FOR COLLECTION OF COMMISSION OR
COMPENSATION. (a) This section does not apply to a person or
company that rendered services in connection with a transaction
that is exempt under Subchapter A, Chapter 4005, or under a rule
adopted by the board under Section 4005.024 if the person or company
was not required to be registered by the terms of the exemption.
(b) A person or company may not bring or maintain any action
in a court of this state for collection of a commission or
compensation for services rendered in the sale or purchase of
securities unless the person or company alleges and proves that:
(1) the person or company was:
(A) registered under this title; or
(B) exempt from registration under rules adopted
under Section 4004.001; and
(2) the securities sold were registered under this
title at the time the alleged cause of action arose. (V.A.C.S. Art.
581-34.)
Sec. 4008.004. STAY OF RECOGNITION OR ENFORCEMENT OF
FOREIGN-COUNTRY JUDGMENT. (a) Before a court's recognition or
enforcement of a foreign-country judgment under Chapter 36A, Civil
Practice and Remedies Code, or otherwise, a party against whom
recognition or enforcement of the foreign-country judgment is
sought is entitled to de novo review by a court in this state to
determine whether a party, or the party's successors, assigns,
agents, or representatives seeking recognition or enforcement of
the foreign-country judgment have violated this title or Chapter
17, Business & Commerce Code.
(b) A party seeking de novo review under this section must
file with the court a verified pleading asserting a violation of
this title or Chapter 17, Business & Commerce Code, not later than
the 30th day after the date of service of the notice of filing of the
foreign-country judgment with the court for recognition or
enforcement.
(c) A pleading filed in accordance with Subsection (b)
operates as a stay of the commencement or continuation of a
proceeding to recognize or enforce the foreign-country judgment
until the court completes its de novo review under this section and
renders a final judgment.
(d) A finding by a court of a violation of this title or
Chapter 17, Business & Commerce Code, is a sufficient ground for
nonrecognition of a foreign-country judgment.
(e) This section applies to a foreign-country judgment
involving a contract or agreement for a sale, offer for sale, or
sell as defined by this title, or investment, that imposes an
obligation of indemnification or liquidated damages on a resident
of this state. (V.A.C.S. Art. 581-33-2.)
Sec. 4008.005. SURVIVABILITY OF ACTION. A cause of action
under this title survives the death of a person who might have been
a plaintiff or defendant. (V.A.C.S. Art. 581-33, Subsec. G.)
Sec. 4008.006. SAVING OF EXISTING RIGHTS AND REMEDIES. The
rights and remedies provided by this title are in addition to any
other rights, including exemplary damages, or remedies that exist.
(V.A.C.S. Art. 581-33, Subsec. M.)
SUBCHAPTER B. CIVIL LIABILITY FOR ISSUANCE, SALE, OR PURCHASE OF
SECURITIES
Sec. 4008.051. OFFEROR OR SELLER LIABILITY: REGISTRATION
AND RELATED VIOLATIONS. (a) A person who offers or sells a
security in violation of the following is liable to a person who
buys the security from the offeror or seller:
(1) Section 4003.001(a), 4003.002, 4003.003, or
4003.004; Subchapter B, Chapter 4003, other than Section
4003.054(b)(1); Subchapter C, Chapter 4003, other than Section
4003.103(b); Section 4004.001, 4004.051, 4004.052, 4004.101(a), or
4004.102(a); or Section 4007.103;
(2) Subchapter G, Chapter 4003, other than Section
4003.304, or a requirement of the commissioner under Subchapter G,
Chapter 4003, other than Section 4003.304; or
(3) an order under Section 4007.101 or 4007.104.
(b) The buyer of the security may sue for:
(1) rescission; or
(2) damages if the buyer no longer owns the security.
(V.A.C.S. Art. 581-33, Subsec. A, Subdiv. (1).)
Sec. 4008.052. OFFEROR OR SELLER LIABILITY: UNTRUTH OR
OMISSION. (a) Except as provided by Subsection (c), a person who
offers or sells a security and from whom another person buys the
security is liable to the buyer of the security, regardless of
whether the security or transaction is exempt under Chapter 4005,
if the person offers or sells the security by means of an untrue
statement of a material fact or an omission to state a material fact
necessary in order to make the statements made, in light of the
circumstances under which they are made, not misleading.
(b) The buyer may sue for:
(1) rescission; or
(2) damages if the buyer no longer owns the security.
(c) Except as provided by Subsection (d), a person offering
or selling a security is not liable under Subsection (a) if the
person sustains the burden of proof that either:
(1) the buyer knew of the untruth or omission; or
(2) the offeror or seller did not know, and in the
exercise of reasonable care could not have known, of the untruth or
omission.
(d) The issuer of the security, other than a government
issuer identified in Section 4005.017, is not entitled to the
defense in Subsection (c)(2) regarding an untruth or omission:
(1) in a prospectus required in connection with an
application or registration statement under Subchapter A, B, or C,
Chapter 4003; or
(2) in a writing prepared and delivered by the issuer
in the sale of the security. (V.A.C.S. Art. 581-33, Subsec. A,
Subdiv. (2).)
Sec. 4008.053. BUYER LIABILITY. (a) Except as provided by
Subsection (c), a person who offers to buy or buys a security and to
whom another person sells the security is liable to the seller,
regardless of whether the security or transaction is exempt under
Chapter 4005, if the person offers to buy or buys the security by
means of an untrue statement of a material fact or an omission to
state a material fact necessary in order to make the statements
made, in light of the circumstances under which they are made, not
misleading.
(b) The seller may sue for:
(1) rescission; or
(2) damages if the buyer no longer owns the security.
(c) A person who offers to buy or buys a security is not
liable under Subsection (a) if the offeror or buyer sustains the
burden of proof that either:
(1) the seller knew of the untruth or omission; or
(2) the offeror or buyer did not know, and in the
exercise of reasonable care could not have known, of the untruth or
omission. (V.A.C.S. Art. 581-33, Subsec. B.)
Sec. 4008.054. NONSELLING ISSUER LIABILITY. (a) This
section applies only to an issuer that registers under Subchapter
A, B, or C, Chapter 4003, or under Section 6, Securities Act of 1933
(15 U.S.C. Section 77f), the issuer's outstanding securities for
offer and sale by or for the owner of the securities.
(b) Except as provided by Subsection (d), the issuer is
liable to a person buying the registered security if the prospectus
required in connection with the registration contains, as of its
effective date, an untrue statement of a material fact or an
omission to state a material fact necessary in order to make the
statements made, in light of the circumstances under which they are
made, not misleading.
(c) The buyer of the registered security may sue for:
(1) rescission; or
(2) damages if the buyer no longer owns the security.
(d) The issuer is not liable under Subsection (b) if the
issuer sustains the burden of proof that the buyer knew of the
untruth or omission. (V.A.C.S. Art. 581-33, Subsec. C.)
Sec. 4008.055. CONTROLLING PERSON OR AIDER LIABILITY. (a)
Except as provided by Subsection (b), a person who directly or
indirectly controls a seller, buyer, or issuer of a security is
liable under Section 4008.051, 4008.052, 4008.053, or 4008.054
jointly and severally with the seller, buyer, or issuer and to the
same extent as the seller, buyer, or issuer.
(b) The controlling person is not liable under Subsection
(a) if the controlling person sustains the burden of proof that the
controlling person did not know, and in the exercise of reasonable
care could not have known, of the existence of the facts by reason
of which the liability is alleged to exist.
(c) A person who directly or indirectly with intent to
deceive or defraud or with reckless disregard for the truth or the
law materially aids a seller, buyer, or issuer of a security is
liable under Section 4008.051, 4008.052, 4008.053, or 4008.054
jointly and severally with the seller, buyer, or issuer and to the
same extent as the seller, buyer, or issuer.
(d) There is contribution under this section as in cases of
contract among the several persons who are liable. (V.A.C.S. Art.
581-33, Subsec. F.)
Sec. 4008.056. RESCISSION. (a) On rescission under this
subchapter, a buyer of a security shall, on tender of the security
or a security of the same class and series, recover the
consideration the buyer paid for the security plus interest on the
consideration at the legal rate from the date the buyer made the
payment, less the amount of any income the buyer received on the
security.
(b) On rescission under this subchapter, a seller of a
security shall recover the security or a security of the same class
and series, on tender of the consideration the seller received for
the security plus interest on the consideration at the legal rate
from the date the seller received the payment, less the amount of
any income the buyer received on the security.
(c) For a buyer suing under Section 4008.054, the
consideration the buyer paid for the security is deemed to be the
lesser of:
(1) the price the buyer paid; or
(2) the price at which the security was offered to the
public.
(d) A tender specified in this section may be made at any
time before a judgment is entered. (V.A.C.S. Art. 581-33, Subsec.
D, Subdivs. (1), (2), (5), Subsec. E.)
Sec. 4008.057. DAMAGES. (a) In damages under this
subchapter, a buyer of a security shall recover the consideration
the buyer paid for the security plus interest on the consideration
at the legal rate from the date the buyer made the payment, less the
greater of:
(1) the value of the security at the time the buyer
disposed of the security plus the amount of any income the buyer
received on the security; or
(2) the actual consideration received for the security
at the time the buyer disposed of the security plus the amount of
any income the buyer received on the security.
(b) In damages under this subchapter, a seller of a security
shall recover the value of the security at the time of sale plus the
amount of any income the buyer received on the security, less the
consideration paid to the seller for the security plus interest on
the consideration at the legal rate from the date of payment to the
seller.
(c) For a buyer suing under Section 4008.054, the
consideration the buyer paid for the security is deemed to be the
lesser of:
(1) the price the buyer paid; or
(2) the price at which the security was offered to the
public. (V.A.C.S. Art. 581-33, Subsec. D, Subdivs. (3), (4), (5).)
Sec. 4008.058. REQUIREMENTS OF RESCISSION OFFER TO BUYERS.
(a) A rescission offer is sufficient for purposes of Section
4008.062(a) or (b) only if the offer meets the requirements of this
section.
(b) The offer must include financial and other information
material to the offeree's decision whether to accept the offer. The
offer may not contain an untrue statement of a material fact or an
omission to state a material fact necessary in order to make the
statements made, in light of the circumstances under which they are
made, not misleading.
(c) The offeror shall:
(1) deposit funds in escrow in a state or national bank
doing business in this state, or in another bank approved by the
commissioner; or
(2) receive an unqualified commitment from a bank
described by Subdivision (1) to provide funds sufficient to pay the
amount offered.
(d) The amount of the offer to a buyer who still owns the
security must be the amount, excluding costs and attorney's fees,
the buyer would recover on rescission under Section 4008.056(a).
(e) The amount of the offer to a buyer who no longer owns the
security must be the amount, excluding costs and attorney's fees,
the buyer would recover in damages under Section 4008.057(a).
(f) The offer must state:
(1) the amount of the offer, as determined under
Subsection (d) or (e), which must be given:
(A) to the extent practicable, in terms of a
specified number of dollars and a specified rate of interest for a
period starting at a specified date; and
(B) to the extent necessary, in terms of
specified elements, such as the value of the security when the
offeree disposed of the security, that are known to the offeree but
not to the offeror, subject to the provision of reasonable evidence
by the offeree;
(2) the name and address of the bank at which the
amount of the offer will be paid;
(3) that the offeree will receive the amount of the
offer within a specified number of days that is not more than 30
days after the date the bank receives, in form reasonably
acceptable to the offeror and in compliance with the instructions
in the offer:
(A) the security, if the offeree still owns the
security, or evidence of the fact and date of disposition if the
offeree no longer owns the security; and
(B) evidence, if necessary, of elements
described by Subdivision (1)(B);
(4) in a conspicuous manner that the offeree may not
sue on the offeree's purchase under this subchapter unless:
(A) the offeree accepts the offer but does not
receive the amount of the offer, in which case the offeree may sue
within the time allowed by Section 4008.062(a)(1), (b)(1), or
(b)(2), as applicable; or
(B) the offeree rejects the offer in writing
within 30 days of the date the offeree receives the offer and
expressly reserves in the rejection the right to sue, in which case
the offeree may sue not later than one year after the date of the
rejection;
(5) in reasonable detail, the nature of the violation
of this title that occurred or may have occurred; and
(6) any other information the offeror wants to
include. (V.A.C.S. Art. 581-33, Subsec. I.)
Sec. 4008.059. REQUIREMENTS OF RESCISSION OFFER TO SELLERS.
(a) A rescission offer is sufficient for purposes of Section
4008.062(c) only if the offer meets the requirements of this
section.
(b) The offer must include financial and other information
material to the offeree's decision whether to accept the offer. The
offer may not contain an untrue statement of a material fact or an
omission to state a material fact necessary in order to make the
statements made, in light of the circumstances under which they are
made, not misleading.
(c) The offeror shall deposit the securities in escrow in a
state or national bank doing business in this state, or in another
bank approved by the commissioner.
(d) The terms of the offer must be the same, excluding costs
and attorney's fees, as the seller would recover on rescission
under Section 4008.056(b).
(e) The offer must state:
(1) the terms of the offer, as determined under
Subsection (d), which must be given:
(A) to the extent practicable, in terms of a
specified number and kind of securities and a specified rate of
interest for a period starting at a specified date; and
(B) to the extent necessary, in terms of
specified elements that are known to the offeree but not to the
offeror, subject to the provision of reasonable evidence by the
offeree;
(2) the name and address of the bank at which the terms
of the offer will be carried out;
(3) that the offeree will receive the securities
within a specified number of days that is not more than 30 days
after the date the bank receives, in form reasonably acceptable to
the offeror and in compliance with the instructions in the offer:
(A) the amount required by the terms of the
offer; and
(B) evidence, if necessary, of elements
described by Subdivision (1)(B);
(4) in a conspicuous manner that the offeree may not
sue on the offeree's sale under this subchapter unless:
(A) the offeree accepts the offer but does not
receive the securities, in which case the offeree may sue within the
time allowed by Section 4008.062(c)(1) or (2), as applicable; or
(B) the offeree rejects the offer in writing
within 30 days of the date the offeree receives the offer and
expressly reserves in the rejection the right to sue, in which case
the offeree may sue not later than one year after the date of the
rejection;
(5) in reasonable detail, the nature of the violation
of this title that occurred or may have occurred; and
(6) any other information the offeror wants to
include. (V.A.C.S. Art. 581-33, Subsec. J.)
Sec. 4008.060. COSTS; ATTORNEY'S FEES. (a) On rescission
or as a part of damages under this subchapter, a buyer or a seller of
a security shall also recover costs.
(b) On rescission or as a part of damages under this
subchapter, a buyer or a seller of a security may also recover
reasonable attorney's fees if the court finds that the recovery is
equitable under the circumstances. (V.A.C.S. Art. 581-33, Subsec.
D, Subdivs. (6), (7).)
Sec. 4008.061. LIMITATION OF LIABILITY IN SMALL BUSINESS
ISSUANCES. (a) In this section, "small business issuer" means an
issuer that, at the time of an offer to which this section applies:
(1) has annual gross revenues in an amount that does
not exceed $25 million; and
(2) does not have a class of equity securities
registered, or required to be registered, with the Securities and
Exchange Commission under Section 12, Securities Exchange Act of
1934 (15 U.S.C. Section 78l).
(b) This section applies only to:
(1) an offer of securities in an aggregate amount that
does not exceed $5 million made by a small business issuer or by the
seller of securities of a small business issuer; and
(2) a person who has been engaged to provide services
relating to an offer of securities described by Subdivision (1),
including an attorney, an accountant, a consultant, or the firm of
the attorney, accountant, or consultant.
(c) In an action or series of actions under this subchapter
relating to an offer of securities to which this section applies,
the maximum amount that may be recovered against a person to whom
this section applies is three times the fee paid by the small
business issuer or other seller to the person for the services
related to the offer of securities, unless the trier of fact finds
the person engaged in intentional wrongdoing in providing the
services.
(d) A small business issuer making an offer of securities
shall:
(1) provide to the prospective buyer a written
disclosure of the limitation of liability created by this section;
and
(2) receive a signed acknowledgment that the
disclosure was provided. (V.A.C.S. Art. 581-33, Subsec. N.)
Sec. 4008.062. STATUTE OF LIMITATIONS. (a) A person may
not sue under Section 4008.051 or 4008.055 to the extent that
section relates to Section 4008.051:
(1) more than three years after the date of the sale;
(2) if the person received a rescission offer meeting
the requirements of Section 4008.058 before suit, unless the
person:
(A) rejected the offer in writing within 30 days
of the date the person received the offer; and
(B) expressly reserved in the rejection the right
to sue; or
(3) more than one year after the date the person so
rejected a rescission offer meeting the requirements of Section
4008.058.
(b) A person may not sue under Section 4008.052, 4008.054,
or 4008.055 to the extent that section relates to Section 4008.052
or 4008.054:
(1) more than three years after the date of discovery
of the untruth or omission, or after the date discovery should have
been made by the exercise of reasonable diligence;
(2) more than five years after the date of the sale;
(3) if the person received a rescission offer meeting
the requirements of Section 4008.058 before suit, unless the
person:
(A) rejected the offer in writing within 30 days
of the date the person received the offer; and
(B) expressly reserved in the rejection the right
to sue; or
(4) more than one year after the date the person so
rejected a rescission offer meeting the requirements of Section
4008.058.
(c) A person may not sue under Section 4008.053 or 4008.055
to the extent that section relates to Section 4008.053:
(1) more than three years after the date of discovery
of the untruth or omission, or after the date discovery should have
been made by the exercise of reasonable diligence;
(2) more than five years after the date of the
purchase;
(3) if the person received a rescission offer meeting
the requirements of Section 4008.059 before suit, unless the
person:
(A) rejected the offer in writing within 30 days
of the date the person received the offer; and
(B) expressly reserved in the rejection the right
to sue; or
(4) more than one year after the date the person so
rejected a rescission offer meeting the requirements of Section
4008.059. (V.A.C.S. Art. 581-33, Subsec. H.)
SUBCHAPTER C. CIVIL LIABILITY OF INVESTMENT ADVISERS AND
INVESTMENT ADVISER REPRESENTATIVES
Sec. 4008.101. INVESTMENT ADVISER OR INVESTMENT ADVISER
REPRESENTATIVE LIABILITY. (a) An investment adviser or investment
adviser representative who renders services as an investment
adviser in violation of Section 4004.052 or 4004.102(a) or an order
under Section 4007.102 or 4007.104 is liable to the purchaser, who
may sue for damages in the amount of any consideration paid for the
services.
(b) Except as provided by Subsection (c), an investment
adviser or investment adviser representative who commits fraud or
engages in a fraudulent practice in rendering services as an
investment adviser is liable to the purchaser, who may sue for
damages.
(c) An investment adviser or investment adviser
representative who in rendering services as an investment adviser
makes an untrue statement of a material fact or omits to state a
material fact necessary in order to make the statement made, in
light of the circumstances under which the statement is made, not
misleading is not liable under Subsection (b) if the adviser or
representative proves:
(1) the purchaser knew of the truth or omission; or
(2) the adviser or representative did not know, and in
the exercise of reasonable care could not have known, of the untruth
or omission. (V.A.C.S. Art. 581-33-1, Subsecs. A, C.)
Sec. 4008.102. CONTROLLING PERSON OR AIDER LIABILITY. (a)
Except as provided by Subsection (b), a person who directly or
indirectly controls an investment adviser is jointly and severally
liable with the investment adviser under this subchapter and to the
same extent as the investment adviser.
(b) The controlling person is not liable under Subsection
(a) if the controlling person sustains the burden of proof that the
controlling person did not know, and in the exercise of reasonable
care could not have known, of the existence of the facts by reason
of which liability is alleged to exist.
(c) A person who directly or indirectly with intent to
deceive or defraud or with reckless disregard for the truth or the
law materially aids an investment adviser in conduct for which a
cause of action is authorized by this subchapter is jointly and
severally liable with the investment adviser in an action to
recover damages under this subchapter. (V.A.C.S. Art. 581-33-1,
Subsec. E.)
Sec. 4008.103. DAMAGES. In damages under Section
4008.101(b), the purchaser is entitled to recover:
(1) the amount of any consideration paid for the
services, less the amount of any income the purchaser received from
acting on the services;
(2) any loss incurred by the purchaser in acting on the
services provided by the investment adviser or investment adviser
representative;
(3) interest at the legal rate for judgments accruing
from the date the purchaser paid the consideration; and
(4) to the extent the court considers equitable, court
costs and reasonable attorney's fees. (V.A.C.S. Art. 581-33-1,
Subsec. B.)
Sec. 4008.104. STATUTE OF LIMITATIONS. (a) A person may
not sue under Section 4008.101(a) more than three years after the
date the violation occurs.
(b) A person may not sue under Section 4008.101(b) more
than:
(1) five years after the date the violation occurs; or
(2) three years after the date the person knew or
should have known, by the exercise of reasonable diligence, of the
occurrence of the violation. (V.A.C.S. Art. 581-33-1, Subsec. D.)
Sec. 4008.105. REMEDY NOT EXCLUSIVE. A remedy provided by
this subchapter is not exclusive of any other applicable remedy
provided by law. (V.A.C.S. Art. 581-33-1, Subsec. F.)
ARTICLE 2. CONFORMING AMENDMENTS
SECTION 2.01. Section 52.063(c), Agriculture Code, is
amended to read as follows:
(c) A marketing association may not sell and issue shares of
preferred stock to a person who is not a member of the association
unless the association first complies with The Securities Act
(Title 12, Government Code) [, as amended (Article 581-1 et seq.,
Vernon's Texas Civil Statutes)].
SECTION 2.02. Section 58.034(b), Agriculture Code, is
amended to read as follows:
(b) The bonds issued under this chapter and interest
coupons, if any, are investment securities under the terms of
Chapter 8, Business & Commerce Code. The bonds are exempt
securities under The Securities Act (Title 12, Government Code)
[(Article 581-1 et seq., Vernon's Texas Civil Statutes)], and
unless specifically provided otherwise, under any subsequently
enacted securities act. Any contract, guaranty, or any other
document executed in connection with the issuance of bonds pursuant
to this chapter is not a security under The Securities Act (Title
12, Government Code) [(Article 581-1 et seq., Vernon's Texas Civil
Statutes),] and, unless specifically provided otherwise, any
subsequently enacted securities act. The board is authorized to do
all things necessary to qualify the bonds for offer and sale under
the securities laws and regulations of the United States and of the
states and other jurisdictions in the United States as the board
shall determine.
SECTION 2.03. Section 302.053, Business & Commerce Code, is
amended to read as follows:
Sec. 302.053. EXEMPTION: PERSONS REGULATED BY OTHER LAW.
This chapter does not apply to:
(1) a person offering or selling a security that has
been qualified for sale under Chapter 4003, Government Code
[Section 7, The Securities Act (Article 581-7, Vernon's Texas Civil
Statutes)], or that is subject to an exemption under Chapter 4005,
Government Code [Section 5 or 6 of that Act];
(2) a publicly traded corporation registered with the
Securities and Exchange Commission or the State Securities Board,
or a subsidiary or agent of the corporation;
(3) a person who holds a license issued under the
Insurance Code if the solicited transaction is governed by that
code;
(4) a supervised financial institution or a parent, a
subsidiary, or an affiliate of a supervised financial institution;
(5) a person whose business is regulated by the Public
Utility Commission of Texas or an affiliate of that person, except
that this chapter applies to such a person or affiliate only with
respect to one or more automated dial announcing devices;
(6) a person subject to the control or licensing
regulations of the Federal Communications Commission;
(7) a person selling a contractual plan regulated by
the Federal Trade Commission trade regulation on use of negative
option plans by sellers in commerce under 16 C.F.R. Part 425;
(8) a person subject to filing requirements under
Chapter 1803, Occupations Code; or
(9) a person who:
(A) is soliciting a transaction regulated by the
Commodity Futures Trading Commission; and
(B) is registered or holds a temporary license
for the activity described by Paragraph (A) with the Commodity
Futures Trading Commission under the Commodity Exchange Act (7
U.S.C. Section 1 et seq.), if the registration or license has not
expired or been suspended or revoked.
SECTION 2.04. Section 304.002(3), Business & Commerce Code,
is amended to read as follows:
(3) "Consumer good or service" means property of any
kind that is normally used for personal, family, or household
purposes. The term does not include a security, as defined by
Section 4001.068, Government Code [4, The Securities Act (Article
581-4, Vernon's Texas Civil Statutes)].
SECTION 2.05. Section 23.052, Business Organizations Code,
is amended to read as follows:
Sec. 23.052. ORGANIZERS. Subject to The Securities Act
(Title 12, Government Code) [(Article 581-1 et seq., Vernon's Texas
Civil Statutes)], 25 or more persons, the majority of whom must be
residents of this state, may form a business development
corporation to promote, develop, and advance the prosperity and
economic welfare of this state.
SECTION 2.06. Article 59.01(2), Code of Criminal Procedure,
is amended to read as follows:
(2) "Contraband" means property of any nature,
including real, personal, tangible, or intangible, that is:
(A) used in the commission of:
(i) any first or second degree felony under
the Penal Code;
(ii) any felony under Section 15.031(b),
20.05, 20.06, 21.11, 38.04, or Chapter 43, 20A, 29, 30, 31, 32, 33,
33A, or 35, Penal Code;
(iii) any felony under The Securities Act
(Title 12, Government Code) [(Article 581-1 et seq., Vernon's Texas
Civil Statutes)]; or
(iv) any offense under Chapter 49, Penal
Code, that is punishable as a felony of the third degree or state
jail felony, if the defendant has been previously convicted three
times of an offense under that chapter;
(B) used or intended to be used in the commission
of:
(i) any felony under Chapter 481, Health
and Safety Code (Texas Controlled Substances Act);
(ii) any felony under Chapter 483, Health
and Safety Code;
(iii) a felony under Chapter 151, Finance
Code;
(iv) any felony under Chapter 34, Penal
Code;
(v) a Class A misdemeanor under Subchapter
B, Chapter 365, Health and Safety Code, if the defendant has been
previously convicted twice of an offense under that subchapter;
(vi) any felony under Chapter 32, Human
Resources Code, or Chapter 31, 32, 35A, or 37, Penal Code, that
involves the state Medicaid program;
(vii) a Class B misdemeanor under Chapter
522, Business & Commerce Code;
(viii) a Class A misdemeanor under Section
306.051, Business & Commerce Code;
(ix) any offense under Section 42.10, Penal
Code;
(x) any offense under Section 46.06(a)(1)
or 46.14, Penal Code;
(xi) any offense under Chapter 71, Penal
Code;
(xii) any offense under Section 20.05 or
20.06, Penal Code; or
(xiii) an offense under Section 326.002,
Business & Commerce Code;
(C) the proceeds gained from the commission of a
felony listed in Paragraph (A) or (B) of this subdivision, a
misdemeanor listed in Paragraph (B)(vii), (ix), (x), or (xi) of
this subdivision, or a crime of violence;
(D) acquired with proceeds gained from the
commission of a felony listed in Paragraph (A) or (B) of this
subdivision, a misdemeanor listed in Paragraph (B)(vii), (ix), (x),
or (xi) of this subdivision, or a crime of violence;
(E) used to facilitate or intended to be used to
facilitate the commission of a felony under Section 15.031 or
43.25, Penal Code; or
(F) used to facilitate or intended to be used to
facilitate the commission of a felony under Section 20A.02 or
Chapter 43, Penal Code.
SECTION 2.07. Section 54.6385, Education Code, is amended
to read as follows:
Sec. 54.6385. EXEMPTION FROM SECURITIES LAWS. The
registration requirements of The Securities Act (Title 12,
Government Code) [(Article 581-1 et seq., Vernon's Texas Civil
Statutes)] do not apply to the sale of a prepaid tuition contract by
the board or by a registered securities dealer or registered
investment adviser.
SECTION 2.08. Section 54.768, Education Code, is amended to
read as follows:
Sec. 54.768. EXEMPTION FROM SECURITIES LAWS. The
registration requirements of The Securities Act (Title 12,
Government Code) [(Article 581-1 et seq., Vernon's Texas Civil
Statutes)] do not apply to the sale of a prepaid tuition contract by
the board or by a registered securities dealer or registered
investment adviser.
SECTION 2.09. Section 54.907, Education Code, is amended to
read as follows:
Sec. 54.907. EXEMPTION FROM SECURITIES LAWS. An ABLE
account is not a security within the meaning of the term as defined
by Section 4001.068, Government Code [4, The Securities Act
(Article 581-4, Vernon's Texas Civil Statutes)], and is exempt from
the provisions of The Securities Act (Title 12, Government Code)
[(Article 581-1 et seq., Vernon's Texas Civil Statutes)].
SECTION 2.10. Section 255.251(1), Estates Code, is amended
to read as follows:
(1) "Securities" has the meaning assigned by Section
4001.068, Government Code [4, The Securities Act (Article 581-4,
Vernon's Texas Civil Statutes)].
SECTION 2.11. Section 31.007(a), Finance Code, is amended
to read as follows:
(a) An officer, director, or employee of a bank that has its
main office or a branch located in this state with fewer than 500
shareholders or of a bank holding company with fewer than 500
shareholders that controls a bank that has its main office or a
branch located in this state is exempt from the registration and
licensing provisions of The Securities Act (Title 12, Government
Code) [(Article 581-1 et seq., Vernon's Texas Civil Statutes)] with
respect to that person's participation in a transaction, including
a sale, involving securities issued by:
(1) the bank or bank holding company of which that
person is an officer, director, or employee;
(2) a bank holding company that controls the bank of
which that person is an officer, director, or employee; or
(3) a bank controlled by the bank holding company of
which that person is an officer, director, or employee.
SECTION 2.12. Section 89.005, Finance Code, is amended to
read as follows:
Sec. 89.005. EXEMPTION FROM SECURITIES LAWS. A savings
account, certificate, or other evidence of an interest in the
savings liability of an association or federal association is not
considered a security under The Securities Act (Title 12,
Government Code) [(Article 581-1 et seq., Vernon's Texas Civil
Statutes)]. A security of these associations, other than an
interest in the savings liability of an association, is not subject
to the registration requirements of that act. A person whose
principal occupation is being an officer of an association is
exempt from the registration and licensing provisions of that act
with respect to that person's participation in a sale or other
transaction involving securities of the association of which the
person is an officer.
SECTION 2.13. Section 119.007, Finance Code, is amended to
read as follows:
Sec. 119.007. EXEMPTION FROM SECURITIES LAWS. A deposit
account, certificate, or other evidence of an interest in the
deposit liability of a savings bank or federal savings bank is not
considered a security under The Securities Act (Title 12,
Government Code) [(Article 581-1 et seq., Vernon's Texas Civil
Statutes)]. A security of these savings banks, other than an
interest in the deposit liability of a savings bank, is not subject
to the registration requirements of that Act. A person whose
principal occupation is being an officer of a savings bank is exempt
from the registration and licensing provisions of that Act with
respect to that person's participation in a sale or other
transaction involving securities of the savings bank of which the
person is an officer.
SECTION 2.14. Section 149.002(c), Finance Code, is amended
to read as follows:
(c) In this section, "security" has the meaning assigned by
Section 4001.068, Government Code [4, The Securities Act (Article
581-4, Vernon's Texas Civil Statutes)].
SECTION 2.15. Section 181.006, Finance Code, is amended to
read as follows:
Sec. 181.006. EXEMPTION OF TRUST INSTITUTION DIRECTORS AND
PERSONNEL FROM SECURITIES LAW. An officer, director, manager,
managing participant, or employee of a trust institution with fewer
than 500 shareholders or participants, including a state trust
company or a trust institution organized under the laws of another
state that lawfully maintains an office in this state, or a holding
company with fewer than 500 shareholders or participants that
controls a trust institution is exempt from the registration and
licensing provisions of The Securities Act (Title 12, Government
Code) [(Article 581-1 et seq., Vernon's Texas Civil Statutes)] with
respect to that person's participation in a transaction, including
a sale, involving securities issued by the trust institution or the
holding company of which that person is an officer, director,
manager, managing participant, or employee if the person is not
compensated for the person's participation in the transaction.
SECTION 2.16. Section 273.004, Finance Code, is amended to
read as follows:
Sec. 273.004. EXEMPTION FROM SECURITIES ACT. (a) A
security issued by the corporation under this chapter is not
considered a "security" under The Securities Act (Title 12,
Government Code) [(Article 581-1 et seq., Vernon's Texas Civil
Statutes)].
(b) A person authorized by and acting on behalf of the
corporation is exempt from the registration and licensing
provisions of The Securities Act (Title 12, Government Code)
[(Article 581-1 et seq., Vernon's Texas Civil Statutes)] with
respect to that person's participation in a sale or other
transaction involving a security of the corporation.
SECTION 2.17. Section 103.033, Government Code, is amended
to read as follows:
Sec. 103.033. MISCELLANEOUS FEES AND COSTS: THE
SECURITIES ACT. A fee shall be collected for the sale of
securities under an offering that has not been registered, if the
transaction or securities are not exempt under Section 4006.153
[35-2, The Securities Act (Article 581-35-2, Vernon's Texas Civil
Statutes)], in an amount set by the securities commissioner or
court, but not to exceed six times the amount that would have been
paid if the issuer had filed an application to register the
securities and paid the fee prescribed based on the amount of sales
made in this state within the prior three years, plus interest on
that amount from the date of the first sale made in this state until
the date the fee is paid.
SECTION 2.18. Section 411.139, Government Code, is amended
to read as follows:
Sec. 411.139. ACCESS TO CRIMINAL HISTORY RECORD
INFORMATION: STATE SECURITIES BOARD. (a) The securities
commissioner is entitled to obtain from the department criminal
history record information maintained by the department that
relates to a person who is:
(1) an applicant for a certificate of registration
under The Securities Act (Title 12, Government Code) [(Article
581-1 et seq., Vernon's Texas Civil Statutes)];
(2) a holder of a certificate of registration under
The Securities Act (Title 12, Government Code) [(Article 581-1 et
seq., Vernon's Texas Civil Statutes)];
(3) an applicant for employment by the State
Securities Board; or
(4) an employee of the State Securities Board.
(b) Criminal history record information obtained by the
securities commissioner under this section may not be released by
any person or agency except on court order or with the consent of
the person who is the subject of the criminal history record
information, unless the information is entered into evidence by the
State Securities Board or a court at an administrative proceeding
or a civil or criminal action under The Securities Act (Title 12,
Government Code) [(Article 581-1 et seq., Vernon's Texas Civil
Statutes)].
SECTION 2.19. Section 552.112(b), Government Code, is
amended to read as follows:
(b) In this section, "securities" has the meaning assigned
by The Securities Act (Title 12, Government Code) [(Article 581-1
et seq., Vernon's Texas Civil Statutes)].
SECTION 2.20. Section 815.301(f), Government Code, is
amended to read as follows:
(f) For purposes of the investment authority of the board of
trustees under Section 67, Article XVI, Texas Constitution,
"securities" means any investment instrument within the meaning of
the term as defined by Section 4001.068 [4, The Securities Act
(Article 581-4, Vernon's Texas Civil Statutes)], 15 U.S.C. Section
77b(a)(1), or 15 U.S.C. Section 78c(a)(10).
SECTION 2.21. Section 825.301(a), Government Code, is
amended to read as follows:
(a) The board of trustees shall invest and reinvest assets
of the retirement system without distinction as to their source in
accordance with Section 67, Article XVI, Texas Constitution. For
purposes of the investment authority of the board of trustees under
Section 67, Article XVI, Texas Constitution, "securities" includes
any investment instrument within the meaning of the term as defined
by Section 4001.068 [4, The Securities Act (Article 581-4, Vernon's
Texas Civil Statutes)], 15 U.S.C. Section 77b(a)(1), or 15 U.S.C.
Section 78c(a)(10), any derivative instrument, and any other
instrument commonly used by institutional investors to manage
institutional investment portfolios. An interest in a limited
partnership or investment contract is considered a security without
regard to the number of investors or the control, access to
information, or rights granted to or retained by the retirement
system. Any instrument or contract intended to manage transaction
or currency exchange risk in purchasing, selling, or holding
securities is considered to be a security. Investment decisions
are subject to the standard provided in the Texas Trust Code by
Section 117.004(b), Property Code.
SECTION 2.22. Section 840.301(c), Government Code, is
amended to read as follows:
(c) For purposes of the investment authority of the board of
trustees under Section 67, Article XVI, Texas Constitution,
"securities" means any investment instrument within the meaning of
the term as defined by Section 4001.068 [4, The Securities Act
(Article 581-4, Vernon's Texas Civil Statutes)], 15 U.S.C. Section
77b(a)(1), or 15 U.S.C. Section 78c(a)(10).
SECTION 2.23. Section 845.301(a), Government Code, is
amended to read as follows:
(a) The assets of the retirement system shall be invested
and reinvested without distinction as to their source in accordance
with Section 67, Article XVI, Texas Constitution. For purposes of
the investment authority of the board of trustees under Section 67,
Article XVI, Texas Constitution, "securities" means any investment
instrument within the meaning of the term as defined by Section
4001.068 [4, The Securities Act (Article 581-4, Vernon's Texas
Civil Statutes)], 15 U.S.C. Section 77b(a)(1), or 15 U.S.C. Section
78c(a)(10). An interest in a limited partnership or investment
contract is considered a security without regard to the number of
investors or the control, access to information, or rights granted
to or retained by the retirement system. Any instrument or
contract intended to manage transaction, currency exchange, or
interest rate risk in purchasing, selling, or holding securities,
or that derives all or substantially all of its value from the value
or performance of one or more securities, including an index or
group of securities, is considered to be a security. Investment
decisions are subject to the standard provided in the Texas Trust
Code by Section 117.004(b), Property Code.
SECTION 2.24. Section 855.301(a), Government Code, is
amended to read as follows:
(a) The board of trustees shall invest and reinvest the
assets of the retirement system without distinction as to their
source in accordance with Section 67, Article XVI, Texas
Constitution. For purposes of the investment authority of the
board of trustees under Section 67, Article XVI, Texas
Constitution, "security" means any investment instrument within
the meaning of the term as defined by Section 4001.068 [4, The
Securities Act (Article 581-4, Vernon's Texas Civil Statutes)], 15
U.S.C. Section 77b(a)(1), or 15 U.S.C. Section 78c(a)(10).
SECTION 2.25. Section 1371.154(b), Government Code, is
amended to read as follows:
(b) To be eligible to be a financial adviser or an
investment adviser under this subchapter, the adviser must:
(1) be registered:
(A) as a dealer or investment adviser in
accordance with Section 4004.051, 4004.052, or 4004.302 [Section 12
or 12-1, The Securities Act (Article 581-12 or 581-12-1, Vernon's
Texas Civil Statutes)];
(B) with the United States Securities and
Exchange Commission under the Investment Advisers Act of 1940 (15
U.S.C. Section 80b-1 et seq.), if the adviser is providing advice on
the investment of bond proceeds and not on the issuance of a public
security or an interest rate management agreement; or
(C) with the United States Securities and
Exchange Commission as a municipal advisor under Section 15B,
Securities Exchange Act of 1934 (15 U.S.C. Section 78o-4);
(2) have relevant experience in providing advice to
issuers in connection with:
(A) the issuance of public securities;
(B) the valuation of interest rate management
agreements; or
(C) the investment of public security proceeds;
and
(3) acknowledge in writing to the issuer that in
connection with the transaction for which the adviser is providing
advice the adviser:
(A) is acting as the issuer's agent; and
(B) has complied with the requirements of this
subchapter.
SECTION 2.26. Sections 1433.069(b) and (c), Government
Code, are amended to read as follows:
(b) A bond issued under this chapter and any coupon
representing interest on the bond are exempt securities under The
Securities Act (Title 12, Government Code) [(Article 581-1 et seq.,
Vernon's Texas Civil Statutes)].
(c) A lease agreement under this chapter is not a security
under The Securities Act (Title 12, Government Code) [(Article
581-1 et seq., Vernon's Texas Civil Statutes)].
SECTION 2.27. Section 2306.556(b), Government Code, is
amended to read as follows:
(b) A bond or other obligation issued by the corporation is
an exempt security under The Securities Act (Title 12, Government
Code) [(Article 581-1 et seq., Vernon's Texas Civil Statutes)], and
unless specifically provided otherwise, under any subsequently
enacted securities act. Any contract, guaranty, or other document
executed in connection with the issuance of the bond or other
obligation is not an exempt security under that Act, and unless
specifically provided otherwise, under any subsequently enacted
securities act.
SECTION 2.28. Section 221.067, Health and Safety Code, is
amended to read as follows:
Sec. 221.067. EXEMPT SECURITIES. (a) Bonds issued under
this chapter and any interest coupons are exempt securities under
The Securities Act (Title 12, Government Code) [(Article 581-1 et
seq., Vernon's Texas Civil Statutes)].
(b) If the bonds are secured by an agreement by a user to pay
to the development corporation amounts sufficient to pay the
principal of and interest and any redemption premium on the bonds,
the agreement, for the purposes of The Securities Act (Title 12,
Government Code) [(Article 581-1 et seq., Vernon's Texas Civil
Statutes)], is a separate security issued to purchasers of the
bonds by the user, and not by the corporation. The agreement is
exempt from that Act only if:
(1) that Act exempts the agreement; or
(2) the bonds or the payments to be made under the
agreement are guaranteed by any person and the guarantee is an
exempt security under that Act.
SECTION 2.29. Section 223.036(a), Health and Safety Code,
is amended to read as follows:
(a) Bonds issued under this chapter and any interest coupons
are investment securities under Chapter 8, Business & Commerce
Code, and are exempt securities under The Securities Act (Title 12,
Government Code) [(Article 581-1 et seq., Vernon's Texas Civil
Statutes)].
SECTION 2.30. Section 826.204(b), Insurance Code, is
amended to read as follows:
(b) A membership interest in a mutual holding company does
not constitute a security as defined by Section 4001.068,
Government Code [4, The Securities Act (Article 581-4, Vernon's
Texas Civil Statutes)].
SECTION 2.31. Section 829.007, Insurance Code, is amended
to read as follows:
Sec. 829.007. SALE OF SECURITIES. (a) A sale, issuance, or
offering of securities under this chapter is exempt from the
registration and licensing provisions of The Securities Act (Title
12, Government Code) [(Article 581-1 et seq., Vernon's Texas Civil
Statutes)].
(b) An officer, director, or employee of an exchange, an
intermediate holding company, a mutual holding company, or a
resulting company who participates in a conversion under this
chapter is exempt from the registration and licensing provisions of
The Securities Act (Title 12, Government Code) [(Article 581-1 et
seq., Vernon's Texas Civil Statutes)]. A person may not receive
compensation, other than that person's usual salary or
compensation, for services performed under the exemption provided
by this subsection.
SECTION 2.32. Section 829.152(b), Insurance Code, is
amended to read as follows:
(b) A membership interest in a mutual holding company does
not constitute a security as defined by Section 4001.068,
Government Code [4, The Securities Act (Article 581-4, Vernon's
Texas Civil Statutes)].
SECTION 2.33. Section 882.756, Insurance Code, is amended
to read as follows:
Sec. 882.756. SALE OF SECURITIES. (a) A sale, issuance, or
offering of securities under this subchapter is exempt from the
registration and licensing provisions of The Securities Act (Title
12, Government Code) [(Article 581-1 et seq., Vernon's Texas Civil
Statutes)].
(b) An officer, director, or employee of a mutual life
insurance company or a mutual insurance holding company or stock
life insurance company resulting from a conversion under this
subchapter who participates in the conversion is exempt from the
registration and licensing provisions of The Securities Act (Title
12, Government Code) [(Article 581-1 et seq., Vernon's Texas Civil
Statutes)]. A person may not receive compensation, other than that
person's usual salary or compensation, for services performed under
the exemption provided by this subsection.
SECTION 2.34. Section 884.002(d), Insurance Code, is
amended to read as follows:
(d) The Securities Act (Title 12, Government Code)
[(Article 581-1 et seq., Vernon's Texas Civil Statutes)] applies to
a stipulated premium company.
SECTION 2.35. Section 884.203, Insurance Code, is amended
to read as follows:
Sec. 884.203. PUBLIC OFFERING OF CAPITAL STOCK. A
stipulated premium company may not make to the public an offering
that is subject to The Securities Act (Title 12, Government Code)
[(Article 581-1 et seq., Vernon's Texas Civil Statutes)], of any of
its capital stock before the company possesses:
(1) capital in an amount of at least $100,000; and
(2) unencumbered surplus in an amount of at least
$100,000.
SECTION 2.36. Section 394.056(a), Local Government Code, is
amended to read as follows:
(a) A bond issued under this chapter or a coupon
representing interest on the bond is, when delivered, a security as
that term is defined under Chapter 8 of the Uniform Commercial Code
(Chapter 8, Title 1, Business & Commerce Code) and is an exempt
security under The Securities Act (Title 12, Government Code)
[(Article 581-1 et seq., Vernon's Texas Civil Statutes)].
SECTION 2.37. Section 501.203, Local Government Code, is
amended to read as follows:
Sec. 501.203. SECURITIES COMMISSIONER PERMIT TO SELL
SECURITIES REQUIRED. A corporation may not sell or offer for sale
bonds or other securities until the securities commissioner grants
a permit authorizing the corporation to offer and sell the bonds or
other securities under the registration provisions of The
Securities Act (Title 12, Government Code) [(Article 581-1 et seq.,
Vernon's Texas Civil Statutes)], except as exempted from
registration by rule or order of the State Securities
Board. Appeal from an adverse decision of the securities
commissioner or the State Securities Board is under the
administrative procedure law, Chapter 2001, Government Code. The
substantial evidence rule applies in an appeal under this
subsection.
SECTION 2.38. Section 901.457(b), Occupations Code, is
amended to read as follows:
(b) This section does not prohibit a license holder from
disclosing information that is required to be disclosed:
(1) by the professional standards for reporting on the
examination of a financial statement;
(2) under a summons or subpoena under the provisions
of the Internal Revenue Code of 1986 and its subsequent amendments,
the Securities Act of 1933 (15 U.S.C. Section 77a et seq.) and its
subsequent amendments, the Securities Exchange Act of 1934 (15
U.S.C. Section 78a et seq.) and its subsequent amendments, or The
Securities Act (Title 12, Government Code) [(Article 581-1 et seq.,
Vernon's Texas Civil Statutes)];
(3) under a court order signed by a judge if the order:
(A) is addressed to the license holder;
(B) mentions the client by name; and
(C) requests specific information concerning the
client;
(4) in an investigation or proceeding conducted by the
board;
(5) in an ethical investigation conducted by a
professional organization of certified public accountants;
(6) in the course of a peer review under Section
901.159 or in accordance with the requirements of the Public
Company Accounting Oversight Board or its successor; or
(7) in the course of a practice review by another
certified public accountant or certified public accountancy firm
for a potential acquisition or merger of one firm with another, if
both firms enter into a nondisclosure agreement with regard to all
client information shared between the firms.
SECTION 2.39. Section 221.025(a), Property Code, is amended
to read as follows:
(a) A developer's compliance with this chapter exempts the
developer's offer and disposition of timeshare interests subject to
this chapter from securities and dealer registration under The
Securities Act (Title 12, Government Code) [(Article 581-1 et seq.,
Vernon's Texas Civil Statutes)].
SECTION 2.40. Section 222.013, Property Code, is amended to
read as follows:
Sec. 222.013. EXEMPT FROM SECURITIES ACT. The filing of a
registration under this chapter exempts the sale of a membership
interest or membership right in a membership camping resort subject
to this chapter from registration under The Securities Act (Title
12, Government Code) [(Article 581-1 et seq., Vernon's Texas Civil
Statutes)].
SECTION 2.41. Section 171.055, Tax Code, is amended to read
as follows:
Sec. 171.055. EXEMPTION--OPEN-END INVESTMENT COMPANY. An
open-end investment company, as defined by the Investment Company
Act of 1940 (15 U.S.C. Section 80a-1 et seq.[, 15 U.S.C.]), that is
subject to that Act and that is registered under The Securities Act
(Title 12, Government Code) [(Article 581-1 et seq., Vernon's Texas
Civil Statutes)] is exempted from the franchise tax.
SECTION 2.42. Section 161.063, Utilities Code, is amended
to read as follows:
Sec. 161.063. EXEMPTION FROM APPLICATION OF SECURITIES ACT.
The Securities Act (Title 12, Government Code) [(Article 581-1 et
seq., Vernon's Texas Civil Statutes)] does not apply to:
(1) an obligation issued to secure a debt of an
electric cooperative to the United States; or
(2) the issuance of a membership certificate by an
electric cooperative.
SECTION 2.43. Section 162.063, Utilities Code, is amended
to read as follows:
Sec. 162.063. EXEMPTION FROM APPLICATION OF SECURITIES ACT.
The Securities Act (Title 12, Government Code) [(Article 581-1 et
seq., Vernon's Texas Civil Statutes)] does not apply to:
(1) a note, bond, or other evidence of indebtedness
issued by a telephone cooperative doing business in this state to
the United States;
(2) an instrument executed to secure a debt of a
telephone cooperative to the United States; or
(3) the issuance of a membership certificate by a
telephone cooperative or a foreign corporation doing business in
this state under this chapter.
SECTION 2.44. Section 67.015, Water Code, is amended to
read as follows:
Sec. 67.015. EXEMPTION FROM SECURITIES ACT. The Securities
Act (Title 12, Government Code) [(Article 581-1 et seq., Vernon's
Texas Civil Statutes)] does not apply to:
(1) a note, bond, or other evidence of indebtedness
issued by a corporation doing business in this state to the United
States;
(2) an instrument executed to secure a debt of a
corporation to the United States; or
(3) the issuance of a membership certificate or stock
certificate of a corporation.
ARTICLE 3. REPEALER
SECTION 3.01. The Securities Act (Article 581-1 et seq.,
Vernon's Texas Civil Statutes) is repealed.
ARTICLE 4. GENERAL MATTERS
SECTION 4.01. This Act is enacted under Section 43, Article
III, Texas Constitution. This Act is intended as a recodification
only, and no substantive change in law is intended by this Act.
SECTION 4.02. This Act takes effect January 1, 2022.
______________________________ ______________________________
President of the Senate Speaker of the House
I certify that H.B. No. 4171 was passed by the House on May 3,
2019, by the following vote: Yeas 140, Nays 0, 2 present, not
voting.
______________________________
Chief Clerk of the House
I certify that H.B. No. 4171 was passed by the Senate on May
21, 2019, by the following vote: Yeas 31, Nays 0.
______________________________
Secretary of the Senate
APPROVED: _____________________
Date
_____________________
Governor